How to Save Documents for Tax Preparation

Most working Americans know that tax preparation starts with compiling financial documents. However, exactly which documents should you be saving, and for how long? To facilitate your return every year, here’s what you should know about keeping essential records.

Which Documents Do You Need to Save?

After evaluating your situation, a tax professional can provide a detailed list of everything you’ll need to complete your return. Most people will need to compile end-of-year statements for all relevant accounts, receipts for their deductible expenses, and records of any estimated taxes they paid. You’ll also need to save the various tax documents you receive each January, including W-2s, 1040s, 1099s, and 1098s.

How Long Should You Keep Each Year’s Records?

Financial documents can pile up fast. Thankfully, taxpayers aren’t expected to preserve them forever. As a general rule of thumb, you should keep all records for the prior three tax years. However, in some circumstances, the IRS can go even further back to conduct an audit. For example, should you file a claim for a loss from bad debt deduction or worthless securities, the IRS has seven years to take a closer look. If they choose to do so, you’ll have to supply all the documents they request to resolve any discrepancies.

If you don’t have the space to store your records from the past seven years, consider digitizing your files. Just make sure to copy everything onto more than one password-protected platform. As long as your system has redundancies, your documents will be accessible, even if your hard drive crashes. Alternatively, if you’re storing paper documents, make sure they’re in a waterproof, fireproof box.

Once you’ve compiled all necessary documents, turn to ZP Tax, Inc. for help completing your return. Located in Silver Spring, MD, this firm serves individuals and businesses across Montgomery County. Their certified agents will complete your return accurately and thoroughly while maximizing deductions along the way. To make an appointment and discuss your tax preparation, reach out on their website or call (301) 587-4829 .