When you finish filing your tax returns, do not plan on getting rid of your tax records just yet. It is crucial to keep your tax records in case you are ever audited or if you need to amend a return. Typically, you should keep your tax records until the period of limitation runs out for that tax return. The period of limitations, also known as the statute of limitations, is the period of time in which you can amend your tax return or the IRS can assess additional tax.
The IRS has some guidelines as to how long you should keep your tax records.
This timespan applies for the typical tax return. In standard tax-filing circumstances, you should keep your tax records three years from the date you filed the original return. There are several exceptions to this three year time span.
There are a couple of scenarios in which the IRS has extended the period of limitations. If you do not report all of the income that should be reported, and it is more than 25% of the gross income shown on your return, then you should keep your tax records six years from the date you filed the original return.
You should keep your tax records for seven years if you file a claim for a loss from worthless securities or bad debt deduction. This is how long the IRS has to question you about your losses.
You should keep your tax records forever if you do not file a return or if you file a fraudulent return. These are definitely not a common scenarios.
Records Dealing with Property
You should keep records relating to property until the period of limitations expires for the year in which you 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.
If you want more details regarding this information, refer to the IRS website: How Long to keep your tax records
The above is considered to be general tax information and is not intended to be used as tax advice. If you believe that any of the above applies to you, please consult with a tax professional. See our Legal Statement.