One question I get all the time is how long should I keep my tax records? Well for individuals the minimum you should keep is four years from when the return was filed, so in January 2011 you should keep at least 2006 records on. As far as records of stocks and real estate purchases, you should keep them until you sell them, then for 4 years after that. This is the minimum. If you have questionable tax items on your return you might want to keep them a little longer as the IRS can go back an unlimited number of years if it can prove fraud – and with the IRS fraud can be a nebulous thing.For businesses it is a good idea to keep 10 years of records just for comparison purposes and other reasons even though the statute of limitations is the same.
Brian’s Tax Musings
This isn’t really a tax tip, except for info storage. Rather than keeping a box or folder of tax receipts, use a scanner and your computer as a storage unit. Store all your receipts on pdf so you can better manage them. If you scan them in as you get them, it will be easier than to scan in a whole month (or 2 or 3). I will discuss this further in my February newsletter.
Brian’s Tax Musings
Hey all you sole proprietors, partnerships and single person LLCs – for 2010 only, not only can you deduct your self employed health insurance on the first page of your return to reduce AGI, guaranteeing an income tax deduction, you can also take it as a deduction for self-employment tax purposes! This gives you another 15% deduction. What a gift from our government! As of now, the self-employment tax deduction disappears in 2011, so this is a one-time shot.