Quick Tax Tips For The Tax Season (Tip #23)
How Long To Keep Tax Records
The worst
thing that you can do in taxes is throwing away tax records too early. Don't
ever assume that you won't be chosen for an audit. You need to learn the basic
rules on how long to keep records. Today's post will share the IRS view on how
long to keep records. As always, I have included the direct link to the IRS
website source.
How long should I keep records?
The length of time you should keep a
document depends on the action, expense, or event which the document records.
Generally, you must keep your records that support an item of income, deduction
or credit shown on your tax return until the period of limitations for that tax
return runs out.
The period of limitations is the
period of time in which you can amend your tax return to claim a credit or
refund, or the IRS can assess additional tax. The information below reflects
the periods 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.
Note: Keep copies of your filed tax returns. They help in
preparing future tax returns and making computations if you file an amended
return.
Period of Limitations that apply to
income tax returns
- Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
- 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, if you file a claim for credit or refund after you file your return.
- Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
- Keep records for 6 years 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 indefinitely if you do not file a return.
- Keep records indefinitely if you file a fraudulent return.
- Keep 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.
Are the records connected to
property?
Generally, 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 or otherwise dispose of the property.
If you received property in a
nontaxable exchange, your basis in that property is the same as the basis of
the property you gave up, increased by any money you paid. You must keep the
records on the old property, as well as on the new property, until the period
of limitations expires for the year in which you dispose of the new property.
What should I do with my records for
nontax purposes?
When your records are no longer
needed for tax purposes, do not discard them until you check to see if you have
to keep them longer for other purposes. For example, your insurance company or
creditors may require you to keep them longer than the IRS does.
SOURCE: https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records
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