The 2024 tax season has officially concluded, but as we all know, the relief is brief, and it will resume shortly, beginning in January. While most of us are mentally unprepared yet will be able to get on with it quickly, others of us will simply be unprepared because we will lack the appropriate paperwork that the Internal Revenue Service (IRS) will require us to furnish in order to make our returns go more smoothly.
There is usually no need to panic; most documents can be obtained from legitimate sources as many times as needed, but this may incur an additional cost, not to mention the added labor during an already stressful time period such as tax season.
To avoid potential tax problems, vital paperwork should be retained for at least three years, preferably five years, and some documents, such as the deed to a home or car, should never be discarded.
Spring cleaning your paperwork is necessary so that you know what you have, and if you’ve gone paperless and most of your notices are online, transferring them to an external drive will save you a lot of problems, but indiscriminately tossing away papers won’t assist anyone in the end.
IRS mandatory documents
First and foremost, the IRS recommends keeping all tax records for three years after filing the return. This includes:
- Letters and notices from the IRS.
- Previous tax returns.
- Documents that justify income, credits or deductions included in the returns.
Locating these and filing them away coded by year will be useful in the event of an audit or legal concern. If your earnings records are not up to date, you can contact the Social Security Administration using the documents that substantiate your income. This is significant since it may affect future payments, and having proof of income will be necessary to address any errors committed.
The IRS also suggests preserving the following critical documents:
- Property records: useful for calculating the value of assets such as a home.
- Health insurance documents: to verify personal and family health coverage.
- Business income and expense records: necessary to justify income and expenses of any business.
Some of these records should never be thrown out. Property documents will be useful in future land disputes, sales, and home appraisals, therefore any official paperwork with no expiration date should be kept on hand in case of an issue. The last thing you want is to get involved in a years-long legal struggle that could have been avoided with good documentation.
Most records are available from other sources, as previously said, but having them at home means that if something occurs to the public records office (for example, a pandemic that stops personnel from attending their workplace), you will not have to rely on anyone to resolve things.
Health insurance paperwork are important, especially if they contain policy information that you may need to refer to in the future or while requesting reimbursement for treatments not given.
Other products, such as life insurance or burial coverage, should be held permanently so that they can be cashed in when the time comes. Depending on the insurance provider to contact you for payment may not always be an option or as quick in a time when simplicity of operation is critical.
Business revenue and expense records, as well as other diaries that document business procedures, should be kept for at least ten years to allow for future reference. It is critical that these documents are especially clear and structured, as audits are becoming more often and can be more time-consuming and costly for both the IRS and affected institutions, so do your bit.