In this week’s Tax Tips, Tax Principal Kevin Hickman and Tax Team Member Caroline Gallagher answer the popular question, “What kind of documentation do you need to keep for your tax return?” Great answers to all of your “to keep or not to keep” questions. Click here to see the video.
What kind of documentation do you need to keep for your tax return?
Proper documentation is important for the preparation and defense of your tax return. While you will receive Forms W-2, 1099s, and other items related to your income, expense documentation can present a challenge.
For example, charitable contributions of $250 or more must be supported not only by documentation of the payment but with a confirmation letter from the charity.
In addition, expenses taken as business deductions must be supported by mileage logs or records, receipts, and payment methods.
Receipts for meals and entertainment must include the 5 Ws – who, what, where, when, and why, as well as the amount.
Business expense documentation is required to be kept in a contemporaneous manner, i.e. recorded close to the time the expense was incurred.
How long should you keep records? Generally, records used in preparing your tax returns should be kept for at least seven years.
Records related to assets owned such as real estate or stocks may need to be retained longer as those records will be important in determining the gain or loss when those assets are sold in the future.