Good Tax Planning Starts with Good Recordkeeping by Rick D. Bazzani, CPA

Posted on August 02, 2021 by Rick Bazzani

It is not uncommon to blindly toss documents received throughout the year into a drawer, never to be seen again until it comes time to file your tax returns. This process, however, is not ideal for year-round tax planning, which is critical for tax efficiency and wealth preservation. Instead, take the time now to establish a system for keeping your records safe and organized, whether it be hard copies methodically filed into labeled folders or digital copies saved on your computer and backed up in the cloud and/or on a removable storage device. This will make it easier for you to plan around changing tax laws and take advantage of all the credits and deductions to which you may be entitled.

In general, you should be prepared to hold onto your tax records for seven years or longer, depending on what they represent. For example, you should hold onto receipts from doctors’ visits when you qualify to claim those expenses as deductions. If not, you may throw away those documents at the end of the calendar year. By contrast, keep loan documents until you satisfy all your financial obligations under those agreements, and retain records of investment purchases and sales for an additional three years after you dispose of the investment.

Records to Retain:

Taking the time to keep your tax records organized makes it easier for you to prepare for your annual tax filing obligation and answer any questions from the IRS should you be selected for an audit or examination. It also helps to ensure you do not forget to share any pertinent information with your accountant, who may identity opportunities for you to restructure assets or make decisions that can reduce your future tax liabilities.

About the Author: Rick D. Bazzani, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he provides individuals and business owners with a broad range of tax-efficient estate, trust and gift-planning services.  He can be reached in the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or at