Business and Consumer

How Long Should I Keep My Tax Records?

Tax season is coming soon! Every Tuesday, we will feature at least one article dedicated to taxes. We hope these articles are useful for you, dear reader. Enjoy!
The period of limitations is the time in which you as the taxpayer can amend your tax return to claim a credit or refund, or the IRS can assess additional tax.  Unless otherwise noted, 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.  Also note that you should retain copies of your previously filed tax returns.  They help in preparing future returns and make computations if you need to file an amended return.
1. If you owe additional tax and situations (2), (3), and (4), below, do not apply to you, keep records for 3 years.
2. If 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. If you file a fraudulent return, keep the records indefinitely.
4. You do not file a return, keep the records indefinitely. You file a claim for credit or refund after you file your return; keep the 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 the 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.
The following questions should be applied to each record as you decide whether to keep a document or throw it away.
Records Connected to Assets
Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition.  You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure gain or loss when you sell or otherwise dispose of the property.  Any assets still noted on your tax return as property should retain their records until the end of the statute of limitations.
When the Records are No Longer Required
If your records have exceeded their value for tax purposes, verify it with your insurance company, creditors, etc. to determine if they are required longer than the IRS does.
Final Answer
Scan all of your documents, have at least 2 back-up copies stored, and keep your hard copies stored in a secure location indefinitely if possible.  Although this information does set limits, you must use these guidelines for your own decision-making purposes.


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