How Long Do You Have to Keep Tax Records?

For many financial documents, just 3 years — for others, practically forever

You may be staring at a heap of paperwork when you finish filing your 2022 federal taxes, which are due April 18. Your first urge may be to sweep them all into a paper bag and put the bag under a stairwell. Don’t do that. Instead, keep only the records you need to keep. And that starts with sorting them out.

Try to stay tidy

Neat, complete, well-organized financial files speed the process of filing your tax return and can keep you from making errors. Maintaining some semblance of order after you’ve filed your return — rather than tossing it into a file cabinet or shoebox — will come in handy if the Internal Revenue Service has questions about your form.

“The biggest blunder is not being organized about what records ought to be kept,” says Neal Stern, CPA, a member of the American Institute of CPAs’ National CPA Financial Literacy Commission. “There are people who somehow believe that they should keep all of their paperwork, but they don’t think through what the important paperwork is that should be kept or how it should be kept or how it should be organized.”

People who keep too many financial papers often struggle just as much to find needed documents as those who don’t keep any files. “They end up having drawers full of old papers,” Stern says. “It’s not much better than not having the paperwork if you can’t figure out what you have and where it is.”

What to keep

For an individual tax return, you’ll need to save anything that supports the figures you entered on your return. You should keep the W-2 and 1099 forms you get from employers, for example, as well as any 1099-B or 1099-INT tax documents from banks, brokerages and other investment firms.

If you lost your job last year and received unemployment benefits from the government, be sure to keep your 1099-G form, which reports the amount you have received.

If you’re itemizing your deductions, keep receipts for these: credit card and other receipts, invoices, mileage logs and canceled checks. If you’ve bought or sold mutual fund shares, stocks or other securities, you’ll need confirmation slips (or brokerage statements) that say how much you paid for the investments and how much you received when you sold them. Keep a copy of all your investments for at least three years after you have sold them.

How long to keep it

You’ve likely heard that seven years is the perfect period to hold on to tax records, including returns. The actual time to keep records isn’t that simple, according to Steven Packer, CPA, in the Tax Accounting Group at Duane Morris.

“In most cases, tax records don’t have to be kept for seven years because there’s a three-year statute of limitations,” Packer explains. “So assuming there’s no fraud or nothing else wrong, the IRS cannot look at your tax returns beyond that three-year statute.”

The statute of limitations has some important exceptions, and if your tax return has any of these, you’ll need to keep your returns and your records longer than three years. For example, the statute of limitations is six years if you have substantially underestimated your income. The threshold for substantial understatement is 25 percent of your gross income. If you claim your gross income was $50,000 and it was really $100,000, you’ve substantially understated your income.

The six-year rule also applies if you have substantially overstated the cost of property to minimize your taxable gain. Say if you sold a piece of property for $150,000 and claimed you paid $125,000 instead of the actual $50,000, the IRS has six years to take action against you. And if you have omitted more than $5,000 in income from an offshore account, the statute of limitations is also six years.

Keep records for seven years if you file a claim for a loss from worthless securities or bad-debt deduction. If you haven’t filed a return, or if you have filed a fraudulent return, there’s no statute of limitations for the IRS to seek charges against you.

“Keep a copy of the return itself,” says Henry Grzes, Lead Manager for Tax Practice & Ethics with the American Institute of CPAs. If the IRS says you didn’t file a tax return, a copy of the return itself should settle the matter.

Property records can be forever

Calculating the cost basis on property you live in is relatively simple because most people can avoid paying capital gains tax on their primary residence. If you sell your primary residence, those filing individual returns can exclude up to $250,000 in gains from taxes, and couples filing jointly can exclude up to $500,000. You must have lived in your home for at least two of the past five years to qualify for the exclusion. Even so, you’ll need to save your records of the transaction for at least three years after selling the property.

If your sale doesn’t meet the above criteria, you’ll need to keep records of significant improvements for at least three years after the sale. IRS Publication 523, “Selling Your Home,” spells out what improvements you can add to your cost basis — and reduce your capital gains bill. The same holds true for rental property.

Most brokerages will compute your cost basis for stocks, bonds and mutual funds, although they are only to calculate your cost basis for stock transactions since 2011 and mutual funds since 2012. It’s a good idea to keep all your transaction records, however, in case you change brokers. Your broker is not obligated to hold your records indefinitely. In addition, keep records of any inherited property and its value when the owner died, which will become your tax basis.

If you’re a long-term investor, you could have a long-term headache trying to find the buy ticket for a stock you bought in 2003. “When you finally sell a piece of property what you paid for it 20 years ago, like to have something to prove to the IRS [about your cost basis], says Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting.

There’s nothing wrong with saving your records longer than the legal limits if it gives you peace of mind and you can stand the clutter. You might consider storing some records in the cloud — remote computer storage space that you rent.

Although many people keep paper records, it’s also smart to have the documents converted to electronic files and stored in the cloud. It’s a good idea to have two sets, in case one is destroyed. Finally, remember that your state may have separate rules for keeping records; check with your accountant or state tax department. 

Reprinted from AARP

Colorectal cancer may not cause symptoms, particularly at first. Someone can have colon cancer or rectal cancer  and not know it. That’s why every person should get screened starting at age 45. People at higher risk may need to get checked earlier, according to their risk factors.  

Screening (testing for colorectal cancer) is the No. 1 way you can prevent colon cancer and rectal cancer. 

With screening, colorectal cancer is one of the most preventable cancers. Colon cancer and rectal cancer are also highly treatable if caught early. That’s why on-time screening is essential and lifesaving. Screening should begin at age 45. 

Symptoms of colorectal cancer may include: 

Changing bowel habits 

Changing bowel habits may include intermittent or constant diarrhea and/or constipation, a change in the consistency of your stool, or stools that are more narrow than usual.

Persistent abdominal discomfort

Abdominal discomfort may present as cramps, gas, or pain. You may also feel full, bloated, or like your bowel is not completely empty. Nausea and vomiting can also be a symptoms.

Rectal bleeding

Blood in or on your stool is a symptom of rectal cancer and colon cancer. The blood can be bright red, or the stool may be black and tarry or brick red.

Weakness and/or fatigue 

Weakness and/or fatigue may be a sign of colorectal cancer. Weakness and/or fatigure may be accompanied by anemia or a low red blood cell count.

Unexplained weight loss

A loss of weight for no known reason should always be investigated. Nausea and/or vomiting are also possible symptoms.

Whether via a dating app or social media, meeting new friends and love interests online is more common than ever. But so is online romance fraud, through which criminals devastate tens of thousands of victims and their families every year, both financially and emotionally.

Prevention tips

Take these tips with you to become a smarter consumer and avoid fraud:

• Know who you’re dealing with. In any transaction you conduct, make sure to check with your state or local consumer protection agency and the Better Business Bureau (BBB) to see if the seller, charity, company, or organization is credible. Be especially wary if the entity is unfamiliar to you. Always call the number found on a website’s contact information to make sure the number legitimately belongs to the entity you are dealing with.
• Pay the safest way. Credit cards are the safest way to pay for online purchases because you can dispute the charges if you never get the goods or services or if the offer was misrepresented. Federal law limits your liability to $50 if someone makes unauthorized charges to your account, and most credit card issuers will remove them completely if you report the problem promptly.
• Guard your personal information. Crooks pretending to be from companies you do business with may call or send an email, claiming they need to verify your personal information. Don’t provide your credit card or bank account number unless you are actually paying for something and know who you are sending payment to. Your social security number should not be necessary unless you are applying for credit. Be especially suspicious if someone claiming to be from a company with whom you have an account asks for information that the business already has.
• Stay safe online. Don’t send sensitive information such as credit card numbers by email because it’s not secure. Look for clues about security on Web sites. At the point where you are asked to provide your financial or other sensitive information, the letters at the beginning of the address bar at the top of the screen should change from “http” to “https” or “shttp.” Your browser may also show that the information is being encrypted, or scrambled, so no one who might intercept it can read it. But while your information may be safe in transmission, that’s no guarantee that the company will store it securely. See what Web sites say about how your information is safeguarded in storage.
• Be cautious about unsolicited emails. They are often fraudulent. If you are familiar with the company or charity that sent you the email and you don’t want to receive further messages, send a reply asking to be removed from the email list. However, responding to unknown senders may simply verify that yours is a working email address and result in even more unwanted messages from strangers. The best approach may simply be to delete the email.
• Resist pressure. Legitimate companies and charities will be happy to give you time to make a decision. It’s probably a scam if they demand that you act immediately or won’t take “No” for an answer. Some scammers may also demand you pay off a loan immediately or damaging consequences may occur, always take time to look into who is requesting the money before you pay up.
• Don’t believe promises of easy money. If someone claims that you can earn money with little or no work, get a loan or credit card even if you have bad credit, or make money on an investment with little or no risk, it’s probably a scam. Oftentimes, offers that seem too good to be true, actually are too good to be true.
• Fully understand the offer. A legitimate seller will give you all the details about the products or services, the total price, the delivery time, the refund and cancellation policies, and the terms of any warranty. Contact the seller if any of these details are missing, if they are unable to provide the details, it may be a sign that it’s a scam.
• Get off credit marketing lists. Credit bureaus compile marketing lists for pre-approved offers of credit. These mailings are a goldmine for identity thieves, who may steal them and apply for credit in your name. Get off these mailing lists by calling 888-567-8688 (your social security number will be required to verify your identity). Removing yourself from these lists does not hurt your chances of applying for or getting credit.
• Check your credit reports regularly. If you find accounts that don’t belong to you or other incorrect information, follow the instructions for disputing those items. You can ask for free copies of your credit reports in certain situations. If you were denied credit because of information in a credit report, you can ask the credit bureau that the report came from for a free copy of your file. And if you are the victim of identity theft, you can ask all three of the major credit bureaus for free copies of your reports. Contact the credit bureaus at: Equifax, 800-685-111; Experian, 800-311-4769; TransUnion, 800-888-4213.
  • Everyone can request free copies of their credit reports once a year. In addition to the rights described above, a new federal law entitles all consumers to ask each of the three major credit bureaus for free copies of their reports once in every 12-month period. Go to www.ftc.gov/credit or call 877-382-4357 for more details and to see when you can make your requests. You don’t have to ask all three credit bureaus for your reports at the same time; you can stagger your requests if you prefer. Do not contact the credit bureaus directly for these free annual reports. They are only available by calling 877-322-8228 or going to www.annualcreditreport.com. You can make your requests by phone or online, or download a form to mail your requests.
• Be cautious about offers for credit monitoring services. Why pay extra for them when you can get your credit reports for free or very cheap? Read the description of the services carefully. Unless you’re a victim of serious and ongoing identity theft, buying a service that alerts you to certain activities in your credit files probably isn’t worthwhile, especially if it costs hundreds of dollars a year. You can purchase copies of your credit reports anytime for about $9 through the bureaus’ Web sites or by phone: Equifax, 800-685-111; Experian, 800-311-4769; TransUnion, 800-888-4213.

Reprinted from Fraud.org

As tax filing season rolls on, be on the lookout for the IRS imposter scam. You get a call from someone claiming to be from the IRS, saying you owe a specific amount in taxes, and may threaten to arrest you if you don’t pay immediately. Know the IRS will never call and demand immediate payment without first sending a notice through the mail. Nor will the IRS ever ask for credit or debit cards over the phone, or threaten you with arrest. If you get a call like this, hang up. If you are concerned that you may owe taxes, call the IRS directly at 800-829-1040.

 File your taxes early to beat the cons

It’s tax season which means that scammers want your refund! When you file your taxes, keep your Social Security number safe. Don’t put sensitive documents in your mailbox or leave them unattended in your car. If you file online, use a secure site and don’t transmit sensitive info via wifi, particularly in a public place. Have all your tax documents? File early to beat the cons. 

reprinted from Seniors Plus

It’s time to think about New Year’s resolutions. More than 4 in 10 U.S. adults make at least one, surveys say. Health resolutions are popular. So are resolutions about saving money. That might be especially true this year, due to inflation and an uncertain economy.

What if you combined your desire to get healthier with your determination to stretch your dollars in 2023? You might try some of these ideas:

Resolution #1: Walk more, drive less

If you are lucky enough to live within walking distance of your favorite stores and gathering places, resolve to walk to them more often. You’ll save money on gas and reap the health benefits of walking. Those include lower risks of high blood pressure, heart disease and diabetes, stronger muscles and bones, easier weight maintenance and a better mood, according to the National Institutes of Health.

Not sure you are up to walking through your errands? Start with shorter jaunts: Research suggests every minute matters. If you need some help getting going, in some communities you can find walks led by health professionals, through the Walk With a Doc program (AARP is a sponsor).  

Resolution #2: Lower your thermostat for better sleep

You can take a bite out of your winter heating bills and sleep better by setting your nighttime temperature lower than most people do, research suggests. The Sleep Foundation suggests a range of 60 to 67 degrees, with a sweet spot around 65 degrees.

But Michael Breus, a clinical psychologist and sleep specialist, says that range is too low for many people, including those who sleep nude or with minimal bedding. Also, he says, we tend to feel colder with age, because we lose fat directly beneath our skin, which acts “like a long underwear layer of insulation.”

The best idea, he says, is to experiment with lower temps. If you are younger than 65, he suggests trying 65 degrees to start; people over 65 might start at 70 degrees, he says.

Resolution #3: Drink more water, from fewer bottles

Water is the perfect health drink. But bottled water is much more expensive than tap water, with no health advantages in places where tap water is safe, as it is in most of the United States. If you don’t like the taste of your tap water, are worried about its quality or like fizziness or added flavor, there are simple, inexpensive solutions.

First, you can put a filter on your faucet or under your sink or use a filtered pitcher to remove chlorine, lead and other substances that might affect taste or safety. A pitcher, for less than $40, is the most affordable option, according to Consumer Reports.

For fizzy water, get a soda-making kit, starting for less than $60. Though you can buy flavor packs for soda makers, you can more cheaply add your own fruit juice, herbs or other mixers.

Resolution #4: Rediscover the library

Reading is good for your brain: Studies suggest it can slow memory decline and, if you read fiction, increase your sense of empathy. But buying books and magazines can get expensive.

Luckily, in most U.S. towns and cities, there’s a place where the books are free and plentiful: the library. If you haven’t been to one lately, give it a try, in person or online. The library is a great source of printed books (including large-print versions), and you can also borrow electronic and audiobooks

Resolution #5: Cook with less meat and more beans

“Extend meat dishes by replacing a portion of the meat with canned beans, like black beans, kidney beans or pinto beans,” suggests Christine Rosenbloom, a registered dietitian nutritionist who is the coauthor of Food & Fitness After 50 and a nutrition professor emerita at Georgia State University.

Beans are cheaper protein than meat, and they are full of fiber and other nutrients, Rosenbloom says. To cut the sodium in canned beans, she says, rinse them before use.

Resolution #6: Find free or low-cost exercise classes

In part because of the COVID-19 pandemic, online choices have exploded, and some are free or low-cost, says Cedric Bryant, president and chief science officer of the American Council on Exercise. For example, at Fitness Blender, you can find hundreds of cardio, strength, yoga and other workouts for free (with advertisements). Other sites offer free trials. The best sites, Bryant says, offer classes at varying fitness levels and let you adjust the level if you find a class too hard or too easy.

In-person classes at community recreation centers can also be a bargain, Bryant says. Some people 65 or older qualify for free online and in-person classes through their Medicare Advantage plans. Some insurance companies give discounts on gym memberships, so check with yours. 

Want to try some online classes? AARP’s Staying Fit section has a selection of on-demand exercise videos. Senior Planet from AARP has free online fitness and wellness sessions on weekdays and AARP’s Virtual Community Center also has live exercise and wellness classes. 

Resolution #7: Find the best bets in the center grocery aisles

Nutrition gurus have often told us to focus on the outer edges of the grocery store, where the fresh produce, meats and fish are found. But fresh is not always better, when it comes to price or nutrition, Rosenbloom says. Fish is a great example. “Fish at the fish counter is often frozen fish that has been thawed,” she says, “and it’s more expensive than what’s in the frozen aisle.” Canned tuna and salmon are other affordable options.

Frozen veggies are also great because they cut down on waste. Rosenbloom says: “You only use what you need (and then) reseal the bag and put it back in the freezer for the next meal.”

Resolution #8: Volunteer at a theater or concert hall

If the sound of an orchestra tuning up makes you smile, but a glance at ticket prices at your local theater or concert hall gives you pause, consider volunteering as a ticket-taker or usher. You’ll get to enjoy the performances and a mental health boost, from both the cultural experience and the volunteer work, studies suggest.

If you don’t have time to volunteer, research shows that simple acts of kindness toward others have multiple health benefits.

Resolution #9: Try pickleball

If you haven’t tried it, consider this wildly popular sport to get your heart beating and have some fun with friends. One reason for the craze: The game is easy to learn and costs little to pick up, compared with sports such as tennis and golf, Bryant says. All you need is a paddle, a few people to play with and a court — increasingly available year-round in many gyms and community centers, he says.

Resolution #10: Find your entertainment in nature

Instead of spending a pricey afternoon at the movies or in the mall, go to a park. Soaking up some nature can lower your blood pressure and heart rate, reduce stress and improve memory, studies suggest. While you are out there, look and listen for birds: One study found that seeing and hearing birds boosted mental well-being, even in people with depression.

Resolution #11: Plan and grow a garden

Creating your own natural oasis by planting flowers or food can give you a boost. People who garden see reductions in depression, anxiety and body mass index, and increases in life satisfaction, quality of life and sense of community, research shows.

Those who grow food probably save money, too. On average, home gardens produce about $677 in fruits and vegetables, after subtracting $238 spent on seeds, soil, watering and other costs (but not labor), according to research from Oregon State University. Here are some tips on how to get started gardening.

Resolution #12: Practice more gratitude

Feeling thankful can improve sleep and immunity and reduce depression, anxiety and pain, according to the Mayo Clinic. There’s an obvious way in which gratitude might improve financial health — by reducing urges to spend money on things that don’t make you happy.

“The more grateful we are, the more content we tend to be with what we have,” says Kristi Nelson, executive director of A Network for Grateful Living and author of Wake Up Grateful.

One thing she suggests: When you wake, think immediately of a few things that make you grateful. You might focus, she says, on the parts of your body that work well or the fact that you slept or “that the sun is rising, no matter where you are.”  

Reprinted from AARP