subject: How Long Should I Keep My Tax Records And Copies Of Tax Returns [print this page] What to keep, what not to keep and how long to keep them when it comes to tax records is the most common concern among ordinary individual taxpayers. The short answer is at least 3 years and as much as 6 years and for some items indefinitely.
The IRS has three years from the date you file your return to complete and audit of that tax year unless they suspect that you under reported your income by more than 25 percent in which case they have up to 6 years. In the case of fraud they can go back as far as they want, but his is very rare.
You will want to keep your records at least as long as, what the IRS calls the "period of limitations". This is the time that you have to amend your return and claim a refund or credit and that the IRS has to assess any additional tax due. This time period begins on the date you file your return or the filing deadline whichever is later.
You should keep at least three years of complete returns for your own records in case you find you need to amend and to help you or your accountant in preparing future returns. As a rule you should keep all documentation for anything that appears on your tax return, including receipts, invoices, statements and cancelled checks.
Keeping proof of your income is a good place to start your record keeping. Records regarding you income are things like W-2s from your employer(s), 1099s for interest and dividends and year end bank statements are great examples of the kinds of income records you will need to keep. Just remember if someone gave you money or property chances are you will have to keep a record of it.
What comes in must go out at least some of it anyway and we call those expenses. You do not need to keep track of all your expenses for tax purposes but there are some that you will need like anything that is deductible. Examples of deductible expenses that you should keep records for are; work related expenses, invoices for things that qualify you for special deductions or tax credits, medical expenses and child care costs are all important. Of course you want to remember receipts for charitable donations.
If you own your own home there are a bunch of things here that require good records. Closing statements for your first or second home, invoices for home improvements, cancelled checks or paid receipts for property taxes and insurance records all should be kept for at least three years.
Records regarding your investments are extremely important and can have a big impact on your return especially if they are questioned. Stocks, bonds and real estate, other then your home(s) all have documents associated with them that you should keep. These include brokerage statements (year end) and 1099s related to investment income.
The surest way to save yourself time, trouble and money, if the IRS has a question either about you entire return or an individual item, is good records. Good records enable you to prove why what you did was allowable. The bottom line is the time takes to keep your tax records in order can save more time down the road.
