The ManIt’s an age-old question one never really knows the answer to: how long should you keep your tax records?

The length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out. Tax records such as receipts, canceled checks, and other documents that prove to the IRS an item of income or a tax deduction appearing on your tax return should be kept until the statute of limitations runs out for that tax return.

Usually, this is three years from the date the tax return was due or tax return was filed with the IRS, or two years from the date the tax was paid to the IRS, whichever is later. The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax or question your tax returns. Note: There is no statute of limitations when a tax return is false or fraudulent or when no tax return is filed with the IRS.

You should keep some tax records indefinitely, such as tax records relating to property, since you may need those tax records to prove to the IRS the amount of gain or loss if the property is sold. The below information summarizes the period of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.

  1. You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
  2. You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years.
  3. You file a fraudulent return; keep records indefinitely.
  4. You do not file a return; keep records indefinitely.
  5. You file a claim for credit or refund after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
  6. You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.
  7. Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
  8. Keep records relating to property until the period of limitations expires for the year in which you dispose of the property. You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell

When your records are no longer needed for tax purposes, do not get rid of them until you check to see if you have to keep them longer for other purposes. In this day and age where we are all trying to get rid of clutter, this is one of those areas that does not apply. Use your judgment while e-filing is a fine place to keep records, you must have a reliable back up system. A wise practice would be to print everything out and keep it in a safe place.

For additional information, visit www.irs.gov.

photo credit: Robert S. Donovan

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