Ilion, NY (April 2, 2012)- When talking about estate and long-term care planning, a frequent question people ask is “how long should I keep financial records?”
Jeff Rheinhardt, attorney with Rheinhardt & Bray, PC, an elder law and estate-planning firm with offices in Ilion and Rome, says it depends. “I hate to sound like a lawyer, but it does depend on what kind of records we are talking about and why we are keeping them, “ he explains.
For income tax purposes, most people should keep record for three years. The records they should keep include all 1099 and “W” forms, and any other statements regarding income, deductions, and capital gain or loss transactions. Longer periods will apply to people who fail to report more than 25% of their income, fail to file a return, file a fraudulent return, or claim a loss from worthless securities or deduction for a bad debt loss. Rheinhardt says most people do not fall into any of those exceptions.
“For the vast majority of people we counsel, the three-year rule applies because they file returns that do not significantly under report income, and they do not itemize deductions, “ states Rheinhardt.
He explains that the three-year, limited-record requirement for income taxes poses a problem when it comes to meeting the Medicaid requirements for nursing hoe care. Medicaid wants five years of records. Furthermore, summary statements showing income suitable for income taxes are not adequate for Medicaid
“ Take, for example, the person with a savings account. For tax purposes, she should retain the 1099 form showing the interest earned on that account for three years,” Rheinhard outlines. “However, for Medicaid she would need to include with her application all sixty monthly statements for that account.”
Rheinhardt acknowledges that Medicaid record retention is burdensome, but it is necessary. There are time limits for submitting a Medicaid application, and, although they are generous, if records are incomplete it can be time-consuming and costly to obtain duplicates of missing statements. Nevertheless, his advice is simple.
“If you want to cover both income tax and Medicaid requirements, you need to keep every statement and record for every financial account you have for five years,” concludes Rheinhardt.
Rheinhardt & Bray, PC, periodically holds free, legal clinics on Medicaid and Elder Law. For information about the next available clinic, call the Ilion office at (315)-894-8330