Re: Tax Forms & Bank Statements

How long you should keep tax records depends primarily on various statute of limitations provisions. Exceptions are below:

Retain documents verifying the basis of property (such as real estate or stock) until recognition of gain or loss from sale of the property plus the three-year statute of limitations on the tax return filed with the IRS reporting the sale.

Keep copies of your tax returns filed with the IRS indefinitely.

Retain tax records relating to a claim with the IRS for a tax refund or tax credit based on bad debts or losses on worthless securities for at least seven years.

Because a net operating loss (NOL) can be carried back 5 years and carried forward 20 years, it is important to keep tax records until all net operating losses are used to offset taxable income and the carry forward term expires, plus the three-year statute of limitations on the tax returns filed with the IRS using the carry forward.

The statute of limitations is extended to six years if the IRS finds that gross income on your tax return was understated by more than 25%.

Further, in cases where a fraudulent tax return has been filed with the IRS, or no tax return has been filed with the IRS, assessment by the IRS may be made at any time.

As to banking and related statements you should keep:

• Bank statements—six years

• Brokers’ confirmation slips for purchases—until security is sold

• Canceled checks—six years

• Contracts—seven years after expiration

• Credit card statements—six years

• Receipts for home improvements that can be added to tax basis of home—

six years after home is sold in a transaction that is not a “rollover” transaction

• Insurance papers (all types of insurance)—four years after expiration

• Mortgage records—three years after paid off

How long to keep records. Keep your employment tax records for at least 5 years after the due date of the return on which you report the taxes or the date the taxes were paid, whichever is later.

Documentation relating to specialties in Maryland should be retained beyond the 12 year limitations period and applicable are:

• promissory note or other instrument under seal;

• judgment;

• contract under seal.

Contact me should you require legal assistance.

G. Joseph Holthaus

(410) 799-9002

P.O. Box 8078

Elkridge, Maryland 21075