Getting rid of tax documents that are more than 7 years old

Lots of people wonder how long they should hold onto their tax documents. The IRS states that the length of time that you hold onto certain documents depends on the “action, expense, or event that the document records.”

According to their website:  “Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.

The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax. The information below reflects the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.”

(However, just because it’s safe to get rid of prior supporting evidence, that’s not to say you shouldn’t hold onto electronic copies of previously filed returns. Not only can this help your tax professional prepare future returns, but it can help them make the necessary computations should you find you need to file an amended return.)

Limitation periods for tax documents

The IRS website notes the following guidance when it comes to tax documents:

  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.

In closing

If you have additional questions about how long you should hold onto certain tax documents, or you have questions about whether you need to keep records related to property, we can help. Call Hughes, Snell & Co., PA today to speak with an expert.