Lots of people have questions about how long they should keep their tax documents, and if you’re among the millions of taxpayers wondering how long you should keep yours, you’re not alone.
According to the IRS, the length of time that you should hold onto your documents, including records that support credits or deductions, is as long as it takes for the period of limitations for a particular tax return runs out. (The IRS defines the period of limitations as being the period of time in which you can amend your return to claim a refund or credit, and the period of time that the IRS can review your return and assess additional taxes.)
According to the IRS website, the following period of limitations apply:
- Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
- 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.
- Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
- 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.
- Keep records indefinitely if you do not file a return.
- Keep records indefinitely if you file a fraudulent return.
- Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
Simply stated, you’ll likely need to hold onto your tax documentation for 3-7 years, depending on your unique situation.
Also, of note, is that while it may be OK for you to destroy your documents after the period of limitations expires, you’ll want to check with your accountant or CPA before you do so. Why? Because there is a chance that you may need to hold onto them a bit longer due to requirements set forth by your creditors and/or insurance company.
Lastly, just because you’ve been given the green light in terms of shredding your old tax documents, that’s not to say you should shred your old returns. You should hang onto those indefinitely.
For more information about how long you should keep your tax documents, call our office today to speak with an expert.