Wednesday, April 13, 2011

How Long Should Records Be Kept?

In IRS Tax Tip 2011-71 the IRS has given advise on how long to keep records for tax purposes.  The IRS says the following:

1.  Normally, tax records should be kept for three years.
2.  Some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
3.  In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return.
4.  Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
5.  For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available on the IRS website at  

It is getting more difficult to obtain deductions in an audit, at IRS Appeals, or in court, if records are not available to prove the deduction.  Everyone should keep detailed records and this is especially true for automobile and travel expenses.