Over the years, many of our clients have come to us with this question. Some have an idea or may have heard something regarding how long they should keep their tax documents.
What many of you probably know is that there is a statute of limitations, a certain period of liability, where the IRS can go back and review your tax documents. What some of you may not know, is what that statute of limitations is.
Therefore, I have provided you with a Super Quick Reference Guide on how long you should keep your tax documents:
Unfortunately, I am sorry to say there is no quick answer. There isn’t even one answer. As I said: It Depends.
Even though tax records are put onto standardized forms, there is still a great deal of variation that can occur from one person/entity to the next. Below, you will find the less-quick, Basic Reference guide for the statute of limitations on your tax records:
Please note that each of these is a minimum time frame (from date of filing or due date, whichever is later) and that this is a limited reference, pertaining to Federal Tax documents. Obviously, the simple chart above cannot convey all the details contained in the regulations, so you should consult them as well as a tax professional for those details and any nuances which may apply to you. For statutes of limitations on state taxes, please refer to a tax professional in your state.
Other special circumstances include:
- Records of Assets and Property: Keep records until the statute of limitations runs out for the year you sell them.[i]
- Employment Tax Records: Keep for a minimum of four years[ii]
- Retirement Account Tax Forms: Keep for a minimum of seven years after account is depleted.[iii]
- Loan Documents: Keep, at minimum, until the loan is paid off. [iv]
- Fluctuating or Commission Based Income: In this case, you want to follow the same rules as you would for omitting 25% or more of your income, because you may have done that unintentionally. [v]
Ideally you would like to keep your tax documents for as long as possible, and given the technology available now, it is much easier.
If the IRS does an audit and requests a copy of your tax return, they may accept a digital copy so long as it is legible[vi].
So make a habit of scanning your tax returns and all the supporting documents, and save them electronically. Consider getting secure Cloud storage and keeping the records there. Doing it this way is both safe and clutter-free!
If you have a lot of sensitive documents that need to be kept safe, you may want to consider investing in a fire-proof safe or a safety deposit box and keeping them all there. If you choose either of these, make sure someone you trust knows how to access them in case of an emergency[vii].
Finally, if you have more questions retaining important documentation for legal or financial purposes, you should contact your legal or tax advisor.
Remember, although we do not provide legal or tax advice, we are here to help where we can.
For more information of statutes of limitations for tax assessments, please see the following: https://www.law.cornell.edu/uscode/text/26/6501.
[i]https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records
[ii] ibid
[iii]https://www.irs.gov/retirement-plans/maintaining-your-retirement-plan-records
[iv]https://www.finra.org/investors/save-or-shred-how-long-you-should-keep-financial-documents
[v]http://time.com/money/5217779/how-long-keep-tax-records/
[vi]https://www.irs.gov/pub/irs-tege/rp-97-22.pdf
[vii]https://www.consumerreports.org/taxes/how-long-to-keep-tax-documents/
CRN-2342928-120718