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How Long Should You Keep Your IRS Tax Records?
By iTaxPlan | July 2, 2008
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Generally speaking that would be three years from the date the filing was due OR two years from the date the tax payment was in fact tendered to the IRS—whichever is later. For all reasonable purposes this is the period in which the IRS may question your past tax return(s).
NEWS FLASH!!! But, you need to be aware that there is no statute of limitations where the IRS has reason to believe that the return was fraudulent OR where you failed to file a return.
And herein is the problem. It is very easy for an over zealous IRS agent (most agents are reputable but there are a few rogues that haven’t gotten the message, you know) to claim that they believe your return filed 6 or 7 years ago was ‘fraudulent.’ Well if you destroyed all your tax records you are going to have some problems, aren’t you?
For this reason I advise holding onto your IRS tax returns and supporting documents indefinitely—you can do so digitally to save on space, but keep everything, period.
I know, of course, that a lot of professional tax advisors would disagree with this advice, or at least claim this is overkill, but since it is so simple to store files digitally, I say, what’s the harm—and you may even thank me six, eight or twelve years from now.
If you fail to file at all, well, then you’re opening yourself for heartaches that could easily be avoided.
And, putting aside the risk of the agency claiming fraud (admittedly, not very likely), you should still be holding on to all documentation concerning the value of any real estate or stocks you acquire until you dispose of them so you can demonstrate whether or not you realized a taxable gain or loss.
Bottom line, don’t throw away any IRS tax records, you’ll probably thank me down the road. And, if not, you’ll have a nice bonfire to keep you warm, in which case you’ll still thank me.
Peter Loughlin
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