When you’re preparing your taxes, or gathering information for your tax preparer, having a paper trail to follow is always helpful. It makes it easier to file your taxes and gives you backup should you find your return questioned at a later date. It makes sense to hold on to that paper trail in case you should happen to be audited on a previous years’ return. But exactly what paper should you be keeping and how long should you hold on to it?
Your checkbook can help you record income and expenses that are relevant to your tax return, but you should also keep invoices, receipts, sales slips, or other written documentation that spells out exactly where you spent your money.
You should be able to clearly document deductions like charitable contributions, mortgage interest, childcare expenses, medical expenses, real estate taxes, and alimony.
In the United States, according to the IRS, you could be audited up to three years after filing your tax forms, while in Canada, according to the CRA, you could be reviewed up to six years after filing. You should archive all of your records and documents for at least that long. It’s a good idea to keep documents organized by year, so you can easily retrieve the information if called upon to do so.
After the time has passed, it is still a good idea to retain copies of all of the tax forms you have submitted, but you can feel safe discarding supporting documentation and receipts.
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