Keeping Your Financial Records Straight

March 1, 2019

Tax time is a good time to make sure your essential documents are organized.  The process of filing your tax returns will be far smoother if you can simply pull out a few files and have instant access to information about your income sources, expenses, and investment records.


Here’s a quick list to follow.  Everyone should have these basic documents available:


Income sources:

·   W-2’s

·   1099 and K-1’s

·   Bank statements

·   Brokerage statements

General Expenses:

·   Sales slips and receipts

·   Invoices

·   Cancelled checks

·   Charitable contribution letters or  receipts


Property Records:

·   Closing statements

·   Purchase and sales invoices

·   Proof of payment such as wire  transfer    

   or cashier’s check

·   Insurance and property tax records

·   Improvement expense receipts


Investment Records:

·   Mutual fund and brokerage statements

·   Form(s) 1099, 2439, and K-1


Additional documents might include those related costs and expenses for your home business, square footage dedicated to your work space and storage, and any employee expenses.


You’ll also want to have records of any income from IRA’s and 401(k)s.  Some people have made costly mistakes by miscalculating their Required Minimum Distribution (RMD) or forgetting to take it before April 1st following their 70 1/2 birthday. Penalties for under withdrawing can be as high as 50%.  


The rules can be confusing. Some qualified plans will allow certain participants to defer beginning their RMDs until they retire, even if they are older than 70 1/2. Qualified plan participants should check with employers to determine whether they are eligible for this deferral.



How Long Should You Keep Your Records?

You must keep your tax records until the period of limitations for the return runs out.  That’s the time in which you can amend your tax return to claim a credit or a refund.  It’s also the period when the IRS can assess additional tax.


Keep documents relating to property records until the period of limitations expires for the year in which you disposed of the property.  These records include any depreciation, amortization or depletion deduction.  Keep anything that supports the calculations for gain or loss when you sell or transfer the property.


Here’s a list of records and how long they should be kept:

·   Failing to file a return – keep support records indefinitely

·   Failing to report income that exceeds more than 25% of the income shown on your

    return – six years

·   Owing additional tax but none of the above conditions apply – three years

·   Filing a claim for a refund/credit after filing your return – three years from the filing

   date or two years from date tax paid – whichever is later

·   Filing a claim for worthless securities or bad debt deduction – seven years

·   Keep all employment tax record for at least four years after the date that the tax

   becomes due or is paid  – whichever is later


Even if none of these situations apply, it’s advisable to keep copies of your filed tax returns so you can refer to them when preparing future tax returns or amending older ones.  You may also need older tax returns if you challenge your Social Security records.


Keep or Shred?

If you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you sold, increased by any money you paid.  You must keep the records on both properties until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition.


A good guideline is to keep all tax records for at least seven years.  Consider scanning these documents, saving them electronically to a disk and storing them securely.


The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The opinions expressed here are those of McGee Wealth Management and not necessarily Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment Advisory services offered through McGee Wealth Management, Inc. McGee Wealth Management is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc.

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Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through McGee Wealth Management, Inc. McGee Wealth Management, Inc. is not a registered broker/dealer, and is independent of Raymond James Financial Services.

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