What Supporting Documents Does the IRS Require?
An accurate tax return is built on solid documentation. Understand the principles of keeping records that substantiate your filing and satisfy IRS requirements.
The Internal Revenue Service (IRS) requires taxpayers to maintain records that support the income, deductions, and credits claimed on their tax returns. These supporting documents serve as evidence to validate the figures reported. The IRS relies on this documentation to verify that a return is correct, and the absence of such proof can lead to inquiries, audits, and potential adjustments to your tax liability.
Common Types of Supporting Documents
Income Verification
To substantiate reported income, a variety of documents are necessary. For most employees, Form W-2 is the primary document showing wages and taxes withheld. Self-employed individuals or those with other income sources will rely on the Form 1099 series, which includes:
- Form 1099-NEC for nonemployee compensation.
- Form 1099-MISC for miscellaneous income like rents or royalties.
- Form 1099-INT for interest income.
- Form 1099-DIV for dividends.
- Form 1099-R for distributions from retirement plans.
Partners or shareholders in S corporations receive a Schedule K-1, detailing their share of the entity’s income, deductions, and credits. You must also keep personal records for any income not reported on a standard form, such as bank statements showing deposits, payment app records, or sales records. For investment activities, Form 1099-B provides details on proceeds from broker and barter exchange transactions.
Adjustments to Income
Certain payments can be subtracted from your gross income, and these also require documentation. If you contribute to a traditional Individual Retirement Arrangement (IRA), your annual account statements serve as proof. For individuals paying back student loans, Form 1098-E shows the amount of interest paid for the year, which may be deductible.
Contributions to a Health Savings Account (HSA) are another common adjustment. You will need Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, to show what you contributed. It is also good practice to keep your own records of contributions made through payroll deductions or directly to the HSA provider.
Itemized Deductions and Tax Credits
Taxpayers who itemize deductions need detailed records. Medical expense deductions require receipts from doctor visits, hospital stays, and prescription drug purchases, as well as a mileage log for travel to medical appointments. To claim the state and local tax (SALT) deduction, you need records of taxes paid, including income or sales tax, real estate tax statements, and personal property tax receipts.
Charitable contributions must be substantiated with bank records, like canceled checks or credit card statements, and written acknowledgments from the charity. For any single contribution of $250 or more, a written acknowledgment from the organization is required. Homeowners use Form 1098 to document mortgage interest paid.
Self-employed individuals must keep records for business expenses, including receipts, invoices, and bank statements categorized by expense type. A detailed mileage log is necessary to deduct vehicle expenses. To claim tax credits, specific proof is needed. For the Child and Dependent Care Credit, this includes records of payments to a childcare provider and their taxpayer identification number. For education credits, you will need Form 1098-T from the educational institution.
Record Retention Guidelines
The IRS has specific timeframes for keeping tax records. The general rule is to keep records for three years from the date you filed your original return or the due date of the return, whichever is later. This is the standard period of limitations for the IRS to assess additional tax.
Certain situations require longer retention periods. If you underreport gross income by more than 25%, the IRS has six years to assess tax, so you must keep records for that return for six years. A seven-year retention period applies if you file a claim for a loss from worthless securities or a bad debt deduction.
Records must be kept indefinitely if you do not file a return or if you file a fraudulent return, as there is no statute of limitations in these instances. You should also keep records related to property, like a home or investments, for as long as you own it plus the period of limitations for the year you sell it. These records help establish the property’s basis to determine gain or loss upon sale.
How to Submit Documents to the IRS
When the IRS requests supporting documents, it is done through a formal letter or notice, such as a CP2000 for underreported income or a CP75 for certain tax credits. You should read this notice carefully, as it will contain the specific reason for the request, the submission address or fax number, and a response deadline.
Prepare an organized submission package with a cover letter that includes your:
- Full name and address
- Social Security Number
- The tax year in question
- The notice number from the IRS correspondence
Arrange your supporting documents in the order they appear on your tax return or as requested in the notice.
It is imperative that you only send copies of your documents, never the originals. The most common submission methods are mail and fax, using the contact information provided in the IRS notice. When mailing your package, consider using a service that provides tracking and proof of delivery, such as certified mail.
The IRS also offers an online submission option through its Document Upload Tool. If your notice indicates this method is available, it is a fast and secure way to transmit your documents. After submission, the IRS will continue its review and may take several weeks to process your information and provide a response.