How Long Should You Keep Income Tax Records and Related Documents?

The length of time you should keep a tax related document is not clear cut. In general, the IRS states you must keep the items that support your income, expenses, deductions and credits claimed on your income tax return until the period of limitations for that return runs out. In most situations, the period of limitations is three years from the date the tax return was due. During this three-year period of time, you may amend your tax return to claim a credit or refund or the IRS can assess additional tax.

The following information contains the periods of limitations that the IRS applies to income tax returns. Unless otherwise noted, the years refer to the period of time after the due date of the tax return. It is important to keep a copy of the supporting documents as this information will be helpful for preparing future tax returns and making computations if you need to file an amended return.

You owe tax and you have accurately reported your income, deductions, and credits, then keep the records for three years.

You do not report income that you should have reported, and it is more than 25% of the gross income shown on your return; then keep records for six years.

You file a fraudulent return; keep your records indefinitely.

You do not file a return; keep your records indefinitely.

You file a claim for a credit or a refund after you file your original tax return; then keep these records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.

You file a claim for a loss from a worthless security or a bad debt deduction; keep these records for seven years.

Keep all employment tax records for at least four years after the date that the tax becomes due or is paid, whichever is later.

In addition, there is a need to keep other types of records and information. You should keep records relating to property that you purchase or inherit 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 allowed and to figure the gain or loss when you sell or otherwise dispose of the property.

When your records are no longer needed for tax purposes, do not discard them until you check to see if you need to keep them longer for other reasons. For example, your insurance company or creditors may require you to keep this information longer.

It is always important to consult with your tax advisoer about this and any other tax related questions you may have. Go to www.irs.gov and search for record keeping for more detailed information about what records to keep, why they are necessary, safekeeping recommendations for your tax records, plus other useful information.

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