Organizing Tax Records – Knowing What to Keep
Tax returns and supporting documents (W-2s, 1099s, receipts, charitable donation records, etc.) can accumulate quickly on paper or in digital files, but it’s important not to discard anything until you’ve reviewed some record-retention guidelines. Be sure to store your 2025 tax returns and all supporting documents with your previous returns in a secure place where you’ll easily find them when needed. This storage can be paper or digital.
What about the ID.me Wallet? You must still keep your tax documents physically or digitally for 3 to 7 years as ID.me does not store the actual return or receipts. It does show transcripts of past tax returns, tax account information, wage and income statements, and verification of non-filing letters in the IRS system.
How long should you keep these records? While the minimum recommendation is 3 years from the date you filed the original return or 2 years from the date you paid the tax, whichever is later, or if you filed a claim for credit or refund after you filed your return. Since there are caveats (https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records) for specific situations it is best to keep your records for 7 years.
When in doubt, a good rule of thumb is 7 years.
Good Recordkeeping and 2026 Tax Planning
Well-organized records make it easier to prepare accurate tax returns and respond if the IRS requests additional information or examines your return. Documents such as receipts and bank statements should support the income, deductions, and credits you report.
Good recordkeeping also helps you monitor financial activity throughout the year. And it can simplify preparing future tax returns or amended returns.
You don’t need to be a tax expert to be knowledgeable about tax planning. Take the time to understand your 2025 tax return.
Did you owe taxes? Here are some options to minimize large tax payments (and possible interest and tax penalties) when the return is filed:
o Ensure overtime and tips are reported correctly on the year-end W2 to take advantage of the Schedule 1-A deductions for 2025-2028
o Planning on getting a new car? Take advantage of the new Auto Loan Interest deduction from H.R.1 (Key Requirements must be met in order to take advantage of this deduction).
o Take advantage of the new 2026 Charitable Donation option ($1,000 for single filers and $2,000 for married filing joint) even if you cannot itemize
o An increase to employer withholding taxes.
o Taxpayers 70 ½ and older looking to minimize taxes from large RMDs can consider Qualified Charitable Donations (QCD) which can directly transfer up to $100K from an IRA to a qualified operating charity and satisfy RMD rules without counting the funds as taxable income.
o Make quarterly estimated tax payments.
Did you get a large refund? Could you have used the money during the year? If any of the following impacted your 2025 tax return, you may need to revisit your tax withholdings and/or estimated tax payments:
o Did you have large tax deductions which will not occur for 2026?
o Experienced a significant life event: getting married or divorced, having a child, buying a home, etc.?
o Utilized the new Social Security deduction?
o Had too much withheld during the year?
o Paid in too much during the year?
Do you regularly make large charitable donations?
o Starting with the filing of the 2026 tax return, 1040 taxpayers who itemize and claim charitable donations will ONLY be able to deduct the portion of their donation which EXCEEDS 0.5% of AGI.
Example: If your AGI is $200,000, only gifts over $1,000 will be deductible
o C Corporations CANNOT contributions equal to the first 1% of their taxable income.
Consider having Ronald Castor LLC, CPA create an overall tax projection and tax strategies including reviewing your current withholdings, estimated tax payments in an effort to reduce 2026 taxes.
No one likes a surprise when filing taxes; consider engaging us to assist you.
Lastly, Don’t Discard These Records Too Soon
Some documents should be retained beyond the typical holding period because they may affect multiple tax years or support future transactions. These include:
Property and investment records. You should keep records related to the purchase and improvement costs of real estate property. Additionally, records of investments (such as stocks or bonds) should also be kept. These records should be kept as long as you own the asset, plus at least three years after its sold. These records are needed to calculate the basis, gain or loss when the asset is sold.
Retirement plan records. Retain retirement and pension documents for as long as the accounts have funds and for at least three years after the accounts are closed or funds are withdrawn. Keep records of nondeductible IRA contributions indefinitely to prove taxes were already paid on those amounts.
Bad debt or worthless securities deductions. Records supporting these claims should generally be kept for seven years from the date the return was due.
Seek Guidance Don’t guess when it comes to tax records. If you’re unsure whether to keep or discard certain documents, contact the office for guidance.
Any accounting, business, Medicare or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement is the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.