Do you have a stack of old tax records that you don’t know what to do with? Are you trying to decide what it is you need to keep and what you can throw out? It can certainly be a confusing and daunting task when it comes to deciding what you need to keep and what no longer needs to clutter your home. Your best bet is to hang on to your tax records until the period of limitations is up.
The IRS recommends retaining tax records for the following timeframes:
Filed Tax Returns
When you file your year-end tax return, you’ll want to keep a copy of what you filed, along with any supporting documentation. While it is always a good idea to keep a copy of your tax return indefinitely, there are some things that you can toss after a certain period of time. These include the following:
- The IRS recommends keeping all basic tax records for a minimum time frame of three years.
- Any employment records are generally safe to toss after four years.
- If you put in a claim for worthless securities, it is recommended that you keep related documentation for a period of seven years.
- If you file a correction for refund or a credit after you have filed your annual tax return, you should keep those records for a time period of three years after you filed your original tax return or two years after any tax due was paid – whichever date comes later.
- When you filed your tax return, if you did not report all of your income and the amount not reported totaled 25% or more of your total gross income, the IRS recommends keeping tax records relating to your return for a period of six years.
- If you have ever filed a fraudulent return, you will want to keep tax records for those years’ returns indefinitely.
- If you have years for which you did not file a return, you will want to keep any tax records for those years indefinitely.
Tax Information in Relation to Your Assets or Property
When it comes to tax information that pertains to property or assets that you own, you should keep all tax records for as long as you own the property or assets. It’s important for you to keep this information in order to be able to figure depreciation, determine gain or loss when you sell, etc. Once you have sold the property or assets, you will still want to hold onto supporting tax information until the period of limitations is up for the calendar year in which you sold the property.
Everything Else You Need to Know
While the basic IRS audit period is three years, it is important to know that there are exceptions and it is critical for you to follow the above guidelines for keeping records in case you are audited. For example, if you are self-employed and the IRS believes that you underestimated your income by more than 25%, they can audit you for a longer time period after you file your tax return.
To be on the safe side, many tax preparers recommend keeping all tax records for a minimum of six years – and even longer, for some individuals. If you’re still unsure as to what to keep, your best bet is to contact your tax preparer to ask his or her opinion of how long you need to keep certain documents and records.