Tax records should be kept year-round, not hastily assembled just for your annual tax appointment. But which records are important, and how and why do you keep them?

Without tax records, you can lose valuable deductions by forgetting to list expenses on your return or having unsubstantiated items disallowed if you're audited.

Generally, returns can be audited up to three years after filing. However, if income is under-reported by 25% or more, the Internal Revenue Service can collect underpaid taxes up to six years later. In other words, you need good records to verify what you report on your tax returns.

Another money-saver: If your records are organized, your accountant will need less time to review your records. This may translate to lower tax preparation fees.

Which records are important?

• Records of income received
• Expense items, especially work-related expenses
• Home improvements, sales and refinances
• Investment purchases and sales information
• The basis of inherited property
• Specific uses of loan proceeds
• Medical expenses
• Charitable contributions
• Interests and taxes paid
• Records on nondeductible IRA contributions