Good recordkeeping will save you time when preparing your taxes. And, should the IRS have any questions, good recordkeeping will help you explain your return. It's a good idea to keep your records in order by date and broken down by category. Organizing your receipts, pay stubs, and various financial forms as the year goes along will make it easier to get the numbers you need when it's time to file your tax return. Several software programs on the market are designed to help you maintain records; however, you still should hold on to original receipts and tax forms. It's a good idea to use a folder, envelope, or binder to keep all your records for the tax year together, and then store those yearly files for later reference.
You should keep your records a minimum of 3 years, but we recommend a minimum of 7 years. Even though you may not need these records for tax purposes, you may wish to maintain them for proof to creditors or for use in insurance claims. The IRS recommends that you keep copies of your W-2s until you're eligible for retirement in case there's a discrepancy.
Records to hold on to:
General financial documents. You should keep pay stubs, W-2s, records of tips earned, receipts for big-ticket items such as the purchase or sale of an automobile or home, records of investments along with contributions to retirement accounts, bank and brokerage statements, and Forms 1099.
Receipts for deductible items. When making payments toward a deductible item by credit card, electronic funds transfer, or check, you’ll need to record the check number, dollar amount, payee’s name, and date of the transaction. If you make a payment in cash, you should get a signed and dated receipt showing the amount and reason for the payment.
Insurance and medical records. Hold on to papers regarding insurance claims and medical expenses, along with dates and details of what was paid for and when.
Theft or loss documentation. A theft or loss should be documented, including the value of the lost or stolen property, the date the property was first noticed missing, and proof that it was yours. You should also hold on to any insurance or appraisal information and police reports.
Gambling records. The IRS provides the following guidelines for proving gambling winnings and losses:
An accurate diary or similar record regularly maintained by the taxpayer, supplemented by verifiable documentation usually is acceptable evidence for substantiation of wagering winnings and losses. In general, the diary should contain at least the following information:
date and type of specific wager or wagering activity;
name of gambling establishment;
address or location of gambling establishment;
name(s) of other person(s) present with the taxpayer at the gambling establishment; and
amount(s) won or lost.
"Verifiable documentation" includes, but is not limited to, wagering tickets, canceled checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided by the gambling establishment. When possible, the diary and available documentation generated with the placement and settlement of a wager should be supported by such documentation as hotel bills, airline tickets, gasoline credit cards, or affidavits or testimony from responsible gambling officials regarding the wagering activity.
Charitable records. For every cash donation you make, regardless of the amount, you need to keep a record of the donation. The IRS will accept a canceled check or a bank copy of it, a credit card receipt, or a bank statement or written communication from the charity showing the charity’s name, the date of the donation, and the amount. However, for cash donations of $250 or more you will also need a written acknowledgement of the donation from the charity to be allowed the deduction.
For property (or noncash) donations, you’ll need a receipt from the charitable organization showing the charity’s name, the date and location of the donation, and a description of the donated item. Donations with a fair market value of $250 or more will need a written acknowledgement of the donation and potentially an appraisal depending on the value and condition of the property.
Also, be sure to keep track of out-of-pocket expenses for charitable work you do, such as mileage, parking fees, tolls, and bus or taxi fares. Record the name of the charity, the date of the expense, and the amount.
Self-employment records. If you’re self-employed or use your home for business, you’ll need to keep detailed records of your expenses and income. To learn more, see Publication 334: Tax Guide for Small Business.