Which Records Should I Keep?
The IRS generally has up to 3 years after the tax-filing deadline to initiate an audit. Keep copies of all documentation needed to prepare your return. This includes W2s, 1099s reporting miscellaneous, interest, dividends, capital gains distributions, K1s, charitable donation documentation, and any other eligible expense for deductions and / or credits.
Beginning in 2014, you will also need to keep records showing that you had minimum essential health insurance coverage, or that you qualified for an exemption, as well as records of any subsidy you may have received. Always keep Form 8606 reporting nondeductible contributions to traditional IRAs until you withdraw all of the money from the IRAs (this is in case you must document that you paid taxes on the contributions and won’t be taxed on them again). Additionally, keep records of home improvements as long as you own your home.
Business records should be kept even longer. The state of New Mexico has been doing gross receipt audits going back 8 years!
When in doubt, DON’T throw it out!!!