Once you’ve filed your tax return, you probably don’t feel like keeping all the paperwork, including your W-2, 1099s, and others. It’s probably fair to say Read this that you don’t even want to think about your taxes at all. But don’t go throwing them out as soon as your mailed your tax return or hit send on your electronic forms.
In fact, there are some documents you’ll want to (and should) retain indefinitely. Making a practice of keeping papers you’ll need for the future will pay off in tax savings later on. Here is a rundown of those documents and why you should keep them.
Copies of Returns
The Internal Revenue Service (IRS) has a limited time in which to audit returns. This time period is generally three years from the date you filed your return.
Keep in mind, though, that this time frame doesn’t apply if the agency thinks you didn’t file a return. If you get a notice saying you never filed, it’s up to you to prove otherwise.
In order to prove your case, you have to retain a copy of your return along with proof of filing.
In fact, the law requires you to hold on to the documentation.
The type of proof depends on how you filed your return:
If you filed a paper return, you should keep a registered or certified receipt. Or, you can keep the slip from a private delivery carrier, such as FedEx or UPS.
For anyone who files electronic returns, the IRS accepts the email acknowledging your return was accepted for filing. You’ll get an email from the provider if you use software (like TurboTax) to file. If you use a paid preparer, ask them for an acknowledgment that your return was accepted.
Documents for Your Home
A personal residence is the largest single asset for many people. It’s also one that can generate a sizable tax bill when sold. The tax law allows up to $250,000 of gain on the sale of a principal residence ($500,000 for joint filers) if certain conditions are met. But you end up with a taxable gain if you don’t meet these conditions or if the gain exceeds the dollar limit.
In order to minimize gain, maximize the basis of the home.
Basis, which starts with what you paid for the home, can be increased by capital improvements, such as an addition, a new roof, appliances, an in-ground swimming pool, and landscaping.
The longer you own the home, the more likely that:
The price you get when you sell will be higher than what you paid
You’ve put more money into the home for improvements
Site Title 