Members of the Maryland Association of Certified Public...

Tax answers

March 20, 1996

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: How long do I need to keep old tax records?

A: In general, records supporting a tax return should be kept for at least three years after the return's due date, or two years after you paid the tax, whichever is later. In the event you inadvertently omitted more than 25 percent of your income (say disability benefits you thought were nontaxable), the IRS has six years after you file to challenge your return, including deductions. In that case, your records would have to be kept at least six years. Of course, if the IRS suspects fraud on your part, there is no statute of limitations, and the IRS could demand that you produce records pertaining to returns filed many years earlier. To complicate things further, there are some records that carry continuing significance and should be kept indefinitely. These would include estate tax returns for proving basis in inherited property, settlement sheets for supporting the cost in your residence, confirmation slips on stock purchases, and stock certificates for closely held corporations, among others.

Q: On a stock transaction, do I use the trade date or the settle date for tax purposes?

A: The trade date should be used for tax purposes. This date should match the 1099b Broker Advice that you receive on broker-assisted trades.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

A joint service from The Sun and the Maryland Association of Certified Public Accountants can help you with your tax queries. Association members, all CPAs, will answer questions from readers until April 15. To ask a tax question, call Sundial, The Sun's telephone information service, at (410) 783-1800. Using a touch-tone phone, enter 6225 after you hear the greeting.

Callers are asked to leave their names and phone numbers, should questions need to be clarified. Selected questions will be answered in the Business section. No questions will be answered by phone. Names and numbers will not be published.

Pub Date: 3/20/96

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