How long to keep certain financial records has been the age old dilemma!
This post is intended to give you some guidelines as to which documents you should save that might be needed for a smoother closing and or jut to make your life simpler.
The most often asked and number one question was: how long to keep tax returns? The answer is not as clear as one would expect. My answer is seven years. The reason that is, because The IRS ha a three years rule to audit your tax returns if they suspect a “good faith error”. Three year error also applies to you, if you discover a mistake in your return and decide to file an amended return to claim a refund. The IRS also has six years to challenge your tax return if they think you under reported your gross income by 25% or more. Hence my reasoning to keep the tax records for seven years!
IRA Contributions records: to me it is clear you need to save them permanently. I would suggest you keep these records indefinitely to prove that you already paid tax in this money or to assure that no one make errors and you can prove that you contributed to an IRA or numerous IRA funds. After all this is your money!
House or Condominium records: Keep al records documenting the purchase price and the cost of all permanent improvements, such as remodeling or additions to the property. All expenses related to selling or ad buying the property, such as escrow costs, legal fees and including taxes paid. This will make life easier for your accountant when he or she is trying to figure out what your capital gains tax burden will be when you sell the property.
I hope I made you think about the most important documents and how long to keep. Keep in mind this is not an all inclusive list, but in my opinion these are at the minimum the most important documents that you should hold on to.
If you are considering buying or selling a luxury home, or an ultra luxury home, or luxury investment real estate, or luxury vacation homes, or luxury beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Marina Del Rey, Venice or Malibu. Feel Free to give me a call at 310.486.1002 or email me at email@example.com or visit one of my websites at http://www.endrebarath.comYour Pet Friendly Realtor. I contribute a portion of my commission to Local Animal Rescue Organizations