How long individuals keep tax records

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Once you file your taxes, you should plan to keep your tax returns for a minimum of three years from the date you filed your original return. You can also keep them for two years if you are calculating from the date you paid the tax, whichever comes later. However, if you file a claim for a loss from securities or bad debt deduction, then you should plan to keep your records for at least seven years. How long do you need to keep all these documents?

That varies based on a few factors. For example, California generally has four years to audit a state income tax return. Also, an insurance company or creditor may have different record-keeping requirements. Greene-Lewis says that rule also applies to self-employed and freelance workers with one exception: If you claim the sale of some type of equipment for your business, you will need to keep them until the three-year statute is up after the year you sell it.

And if you file a fraudulent return, the statute never expires. Greene-Lewis says that any records related to retirement accounts should be held for seven years after you withdraw the money. Generally, the IRS recommends keeping all documents that prove how much income you earned and anything that supports credits or deductions you claim. Your taxes start with how much you made, so keep a record of all the dollars you were paid in a given year. However, you could still need to show the IRS that you were covered.

With that in mind, a shoebox with loads of papers or files scattered throughout your hard drive is not a good move. Instead, start a filing system that organizes all your records by year and by category, such as bank statements, income forms and receipts.

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I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Taxes Income Tax. Advisor Insight If the IRS finds a substantial error in your current return, they could go back six years into your tax history to investigate.

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The statute of limitations on IRS audits is a key factor in deciding how long to keep tax records. Good record-keeping also could help if you need to file an amended return because you discovered a mistake or learned of a tax break you should have claimed. If you're wondering how long to keep tax records, here's what the IRS recommends based on how long it has to come back at you with questions.

In typical tax-filing situations, the IRS has three years to decide whether to audit — or, as the agency prefers to call it, examine — your return.

That means you should keep your tax records for three years from the date you filed the original return. This is good practice, too, because you generally have three years from when you filed your return — or two years from the date the tax was paid, whichever is later — to claim a refund or credit from the IRS. You also should hang on to tax records for three years if you file a claim for a credit or refund after you filed your original return.

The limit here could be shifted to two years from the date you paid any due tax, if that date is later than the three-year limit. The three-year audit period and associated record-keeping guidelines apply in standard filing circumstances. If, however, you don't include all your earnings on your , the IRS gets a longer window to decide on a potential audit, so you need to keep your tax records longer, too.

To deal with any questions, you would need to have those six years worth of tax documents on hand. Sometimes a stock bet doesn't pay off. That's how long the IRS has to come back with questions about your bad investment.

The same time frame applies to deductions for a bad debt. There are some instances in which to keep tax records perhaps forever. Say someone — not you, of course — commits tax fraud. There is no statute of limitations on tax fraud audits. When the IRS suspects someone entered illegal information on a return, it can investigate at any time, not just within the standard three-year window.

You also need to keep documentation of why you didn't file a tax return.