Question: We have been keeping all our IRA documentation since the IRS guidelines (to my understanding) say that you need to keep it forever. However, withdrawals from the IRAs that we have are all taxable income, so why is it necessary to keep the very old statements?
Answer: Record-keeping requirements are stringent for traditional IRAs, whose contributions are generally tax-deductible on the way in while withdrawals are taxable on the way out. “The paperwork you keep is to validate your claim of what’s taxable and what isn’t,” says Greg McBride, chief financial analyst for Bankrate.com
Those particulars will vary with your individual situation. If you and your spouse, if applicable, never had access to a workplace 401(k) or equivalent while you were contributing to your traditional IRA, then that standard tax treatment should apply and you will owe taxes on the withdrawals.
If you’re certain that all of your contributions were deductible on the way in, then you don’t have to keep meticulous paperwork, McBride says. After all, you’ll be paying taxes on everything in that scenario, and the Internal Revenue Service (IRS) certainly won’t quibble with that. Continue reading How long to keep IRA paperwork for taxes?