Once you've filed your tax return, you probably don’t feel like keeping all the paperwork, including your W-2, 1099s, and others. It's prob♋ably fair ♓to say that you don't even want to think about your taxes at all. But don't go throwing them out as soon as your mailed your tax return or hit send on your electronic forms.

In fact, there are some documents you'll want to (and should) retain indefinitely. Making a practice of keeping papers you’ll need for the future will pay off in tax savings later on. Here is a rundown of those documents and why you should keep them.

Copies of Returns

The Internal Revenue Service (IRS) has a limited time in which to audit returns. This time period is generally three years from the date you filed your return. Keep in mind, though, that this time frame doesn't apply if the agency thinks you didn't file a return. If you get a notice saying you never filed, it's up to you to prove otherwise.

In order to prove your case, you have to retain a copy of your return along with proof of filing. In fact, the law requires you to hold on to the documentation. The type o▨f proof depends on how you filed your return:

• If you filed a paper return, you should keep a registered or certified receipt. Or, you can keep the slip from a private delivery carrier, such as FedEx or UPS.
• For anyone who files electronic returns, the IRS accepts the email acknowledging your return was accepted for filing. You'll get an email from the provider if you use software (like TurboTax) to file. If you use a paid preparer, ask them for an acknowledgment that your return was accepted.

The same is true for state income tax returns. Keep a copy of the state income tax return forever, alo🍰ng with proof of filingജ.

Documents for Your Home

A personal residence is the largest single asset for many people. It's also one that can generate a sizable tax bill when sold. The tax law allows up to $250,000 of gain on the sale of a principal residence ($500,000 for joint filers) if certain conditions are met. But you end up with a 澳洲幸运5开奖号码历史查询:taxable gain if you don't meet these conditions or if the gain exceed♔s the dollar limit.

In order to minimize gain, maximize the basis of the home. Basis, which starts with what you paid for the home, can be increased by 澳洲幸运5开奖号码历史查询:capital improvements, such as an addition, a new roof, appliances, an in-ground swimming pool, and landscaping. The longerღ you own the h🎶ome, the more likely that:

• The price you get when you sell will be higher than what you paid
• You’ve put more money into the home for improvements

In addition to home improvements, retain your initial 澳洲幸运5开奖号码历史查询:settlement statement and other papers related to the purchase. This enables you to add the following to your cost basis:

• Abstract or 澳洲幸运5开奖号码历史查询:abstract of title fees
• Charges for installing utility services
• Legal fees, including fees for a title search, sales contract, and deed
• Recording fees
• Survey fees
• 澳洲幸运5开奖号码历史查询:Title insurance
• Transfer or stamp taxes

Keep a record of these expenses for as long as you own your home and then for at least three years after you file your return reporting the sale. The three-year period in most cases is the time in which the IRS can question your position.

Acquisition Costs for Property

Just like home improvements, you want to keep records related tꦍo other property, such as stocks, your vacation home, rental property, or artwo🐓rk.

Remember, you need to know what you paid for the property, including commissions and other acquisition costs. This allows you to properly determine any gains when you sell. If you don't, you may have to pay more in taxes than what would otherwise be due. Keep in mind that it’s up to you to prove your tax basis if the IRS ever challenges your return.

As in the case of records related to your home, keep these records for as long as you own the property and then for at least three years after you file your return reporting the sale of the property.

Inherited Property

When you inherit property, your tax basis becomes the value of the property on the date of the death of the person who left it to you. This is called the stepped-up basis.

Large estates—those valued at over $12.06 million for those dying in 2022, or valued at over $12.02 million for those dying in 2023—report the value on Form 706 of their federal tax returns. Smaller estates may have to report the value of the property on state death tax forms even if no federal return is due. You can get more inform🍨ation about your tax liability from the executor, administrator, or personal representative.

The heirs are responsible to determine the value of any estates that aren't required to file such returns. As such, this value becomes the basis of the property. Make sure you get the values of any publicly-traded securities and an appraisal for any real estate that you inherit for the date of death so you can demonstrate your basis in the future.

As with other property, retain this information for as long as you own the property, plus the period in which the IRS can question your report of a sale.

The Bottom Line

Record-keeping may seem🌸 tedious and cumbersome. Create a record-keeping system that works for you. Simplify your papers by creating🔥 an electronic record by scanning documents you want to keep and retaining them in a file on your laptop, on a flash drive, or in the cloud.

Keeping copies of your key records in the cloud and/or at some other location is aꦰn important safeguard since laptops and flash drives can crash or be lost. And even with electronic records, file the paper ones as well, just in case. It could save you a lot of trouble൩ if you or your heirs need them in the future.