How Long Should I Keep my Tax Records?
Jun 10, 2014
Many people ask this question and their files are full of tax papers and receipts. You need to make sure the papers are kept long enough in case the IRS sends a tax notice, but do you really need to keep 20 years worth? The IRS recommends different years for different situations.
- A normal tax return with no special circumstances or a refund received – 3 years from the date you filed the return
- A tax return with either a bad debt deduction or a loss reported from worthless securities – 7 years from the date filed
- All employment tax records – 4 years after the tax was due or paid
- All records for property and other assets purchased and are recording depreciation or amortization, you must keep these records until you sell or dispose of the property.
- If you did not report income that you should have reported – 6 years
- Or if you did not have to file a return or filed a fraudulent return – records should be kept indefinitely, but we would hope that you are not filing fraudulent returns!
That seems confusing having to check the tax returns to see if there were special situations that you would need to keep longer than a more recent return. William Vaughan Company uses a general record retention guideline of 7 years for all tax returns and work papers. This seems easier to remember.
The IRS expects the tax payers to be able to prove any of the income or deductions for your returns. The burden of proof information includes documents such as W-2’s, 1099’s, bills, canceled checks, receipts, and credit card statements. Additional evidence is required for auto expenses, travel, entertainment and gifts. Keep in mind that many of the cash register receipts may start to fade over time. It might be helpful to either make a copy of the receipts or prepare an Excel spreadsheet with the date, store, amount, and a description of what was purchased and keep with the receipts.
You can clean out much of your old tax paperwork, but it is always interesting to look back at a 20 year old return and compare it to the current year.
Sandra Stone, Accountant