Wednesday 12/28/2016

Is it Safe to Clear Out My Old Income Tax Records?

Lynda Doland, CPA gives some insight on which records you should keep, and for how long:

 

 

All too often, our files get cluttered with old records that we hold on to “just in case.” When it comes to tax returns and other supplemental documents, this article I found from CPA Practice Advisor has tips straight from the IRS:

  1. Always keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you need to file an amended return.
  2. Copies of supporting documents for tax returns should be kept for 7 years as a rule of thumb.
  3. When it comes to real estate, hang on to your records for up to 7 years after disposing of the property.

 

There are also some limitations that would apply to your income tax returns. They are listed here, directly from the IRS:

  1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
  2. 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.
  3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. 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.
  5. Keep records indefinitely if you do not file a return.
  6. Keep records indefinitely if you file a fraudulent return.
  7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

For more great tips from the IRS on maintaining proper records and files, check out their page, “How long should I keep records?

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