Should I keep copies of all my tax returns to prove I have not further reduced the basis of nondeductible contributions I’ve made to IRAs since 2006?

by Alan M. Schapire, CPA | Jan 08, 2019

Between 1988 and 1999, I made four nondeductible contributions to IRAs. I filed Form 8606 for all of these tax years, and I have documentation of my basis. In the years between 2001 and 2006, I partially reduced the basis, and I have documentation of those transactions. I have not reduced the basis since 2006. I plan on just keeping the tax returns for the years in which I have a Form 8606. Do I need to keep copies of all tax returns since 2006 to prove that I have not further reduced the basis? If so, can I just keep the first two pages of the 1040?

The IRS recommends that you retain tax records for three years generally, and for seven years if you file a claim for worthless securities or a bad debt deduction. There are other statutory limits if income is under-reported by 25 percent or more, if tax fraud is involved, or if a tax return was never filed. For something such as basis in an IRA, you should maintain a perpetual schedule showing additions to and subtractions from basis (best practices), or the most recently filed Form 8606 showing the basis remaining in the IRA. Saving a copy of older tax returns and supporting documentation if appropriate, in either paper or electronic format, is recommended but not required.
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Answered by: Alan M. Schapire, CPA, is a principal with Convergent Financial Strategies LLC in Wayne, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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