Taxes:
The Top 10 Tax Documents You SHOULD NEVER Lose
1. Income Statements: Keep all income-related documents such as W-2 forms from employers, 1099 forms for freelance or contract work, 1099-DIV and 1099-INT for dividends and interest income, and any other income statements. These documents provide proof of income and are necessary for accurate tax filing.
2. Tax Returns: Retain copies of your federal and state tax returns for at least seven years. These records are crucial for reference in case of audits, amendments, or when applying for loans and financial aid. They also serve as proof of your filed taxes and can help resolve any discrepancies with the IRS.
3. Proof of Deductions and Credits: Maintain records supporting any deductions and credits you claim, such as receipts for charitable contributions, medical expenses, mortgage interest statements, property tax bills, and education expenses. These documents substantiate your claims and are vital during an audit.
4. Investment Records: Keep detailed records of your investment transactions, including purchase and sale confirmations, annual statements, and records of dividends and interest earned. These records help calculate capital gains and losses, which are necessary for accurate tax reporting.
5. Business Income and Expenses: If you are self-employed or own a business, retain comprehensive records of all business income and expenses. This includes invoices, receipts, bank statements, and records of business-related travel and entertainment. Accurate record-keeping ensures proper reporting and maximizes deductions.
6. Retirement Account Contributions: Preserve records of contributions to retirement accounts like IRAs, 401(k)s, and other qualified plans. This includes Form 5498 for IRA contributions and Form 1099-R for distributions. These records are essential for tracking contributions and calculating the taxable portion of distributions.
7. Homeownership Documents: Keep all records related to homeownership, including the purchase contract, closing statements, mortgage statements, property tax bills, and receipts for home improvements. These documents are necessary for calculating deductions, determining the cost basis, and reporting capital gains when you sell the property.
8. Medical Expense Records: Maintain receipts, invoices, and statements for medical expenses, including doctor visits, prescriptions, health insurance premiums, and medical procedures. These records are essential for substantiating medical expense deductions if they exceed the applicable threshold.
9. Education Expenses: Retain records of education expenses, such as tuition payments, fees, and receipts for books and supplies. These documents support claims for education-related tax credits and deductions, such as the American Opportunity Tax Credit and the Lifetime Learning Credit.
10. Proof of Tax Payments: Keep records of any tax payments made throughout the year, including estimated tax payments, payment receipts, and canceled checks. These documents provide proof of payment and are necessary for reconciling your tax return and avoiding potential penalties.
