Any need to retain IRA or 401k statements for completing state and local income tax returns?
Is there any documentation such as 401k statements from current or previous employers or account statements from financial institutions (e.g. for IRAs) that are necessary to retain for figuring state or local income taxes on ira or 401k distributions? I was wondering if any states’ or localities’ tax return reporting requirements necessitate a breakdown of such things as employee contributions, employer contributions, matching contributions, etc. from, for example, a 401k or 457 plan? Or, are state and local taxes on qualified plan or IRA distributions always determined using the 1099R? I realize there are many state and local taxing jurisdictions in the United States, so this may be difficult to answer. However, I was wondering if anyone has insight into this question. Nobody wants to retain ira or 401k statements for decades if they won’t be needed for tax return completion in future years. Thanks.
Permalink Submitted by Alan - IRA critic on Tue, 2019-12-17 23:37
Tax reporting starts with the 1099R, however some states deviate and state worksheets need to be completed to determine the taxable amount for state return purposes. Generally, it is not necessary to retain old statements for more than 3 years in the event the plan makes an error with an RMD calculation, or if the IRS ever questions basis in your IRA from the rollover of after tax contributions. 403b participants might keep at least one old statement showing the 12/31/1986 balance, if any. But there is no need to keep statements more than 3 years unless there is a long term reason such as tracking old money in a 403b etc. Every so often there is class action securities litigation in which you may need to document how many shares of “X” you held on a certain date, but if you do not do much trading in these accounts, perhaps a single year end statement would suffice. How much to keep is subjective, depending on how much paper you want to retain or wade through for some unlikely need vs. the desire to have a clean desk.