2006-10-24 11:47:26 · 10 answers · asked by punjab 1 in Business & Finance ➔ Taxes ➔ United States
Although the common answer to this question will be "7 years" that is incorrect. You should actually keep copies of your U.S. tax returns forever. The IRS can actually re-open any tax year if they never receive your tax return. There was a horror story about a man who filed a tax return, shredded his copy 7 years later, and 12 years after the tax year, the IRS finally got around to telling him they'd never gotten the return (lost in the mail). He had no way of telling them how he'd done the return, and they re-created it based solely on what's reported to them, which by and large is income, not deductions (except mortgage interest). He ended up owing 10s of thousands of dollars and was screwed!
Keep tax returns and the related receipts in a safe place FOREVER.
2006-10-24 11:51:51 · answer #1 · answered by Nightwalker 3 · 0⤊ 2⤋
There is no actual requirement that you keep the documents at all. The IRS can assess taxes for 3 years after a return is due or filed, whichever is later without alleging fraud. If fraud is alleged, there is no time limit. Any documents relating to the cost of an asset should be kept at least until the tax year in which the asset is sold is no longer open to audit. The IRS has its own recommendations for how long to keep various types of records. I think the 'recovering CPA' had the best response. Keep them forever.
2006-10-24 12:03:27 · answer #2 · answered by STEVEN F 7 · 1⤊ 1⤋
Must, seven.
But forever is better, and not just for tax reasons. My dad died in 1991, and having the records of his tax returns and receipts (the house purchase back in 1950's, the fine art bought in the '60's, the stock purchase documents from the 1930's - 2000's) and my grandparents tax returns (for the inherited value of various things) has been very handy in preparing tax returns for my mother, who can't read very well and remembers ever worse. If your mind goes, if you are incapacitated or you die suddenly, having these documents to hand will allow others to better take care of your affairs. The last thing you want is your family to suffer a financial hardship because you wanted to clear out your basement.
Put the stuff that's over 7 years old in a deep storage section of your home. In an easily accessible part of your home, have a filing cabinet with the current 7 years, records of all your assets (insurance, house & improvements, stocks, collectables, safe deposit box), and copies of the inheritance tax returns of relatives who left you things. Make sure it's all labelled and clear, and make sure someone knows where everything is!
2006-10-24 21:33:00 · answer #3 · answered by lizzit 3 · 1⤊ 1⤋
Just to amplify or clarify some of what is already stated:
The statute of limitations allows a return to be opened and modified by anyone, including the IRS and the taxpayer, for three years.
The statute extends that power to the IRS for five years if there is a material misstatement.
The statute runs forever for cases of fraud and non-filers. So horror stories can be very real.
As far as how long to keep the returns. Personally, I keep returns forever. The supporting documents I usually do not keep after five years.
In practise, I have encountered accountants who keep copies of client records for three years, five years, and forever. I advocate keeping returns forever, not because of IRS scrutiny, but because they are valuable sources of information for planning, and for sourcing historic basis on stock and small businesses.
2006-10-24 12:24:44 · answer #4 · answered by tax_black_belt 2 · 1⤊ 1⤋
I would say that it is between the amount of time that the IRS can audit you (7 years) and the number of years a derogatory item can appear on your credit (10 years).
2006-10-24 11:52:44 · answer #5 · answered by MeNI 2 · 1⤊ 1⤋
For individuals, its 3 years for the IRS to file an audit.
2006-10-24 12:16:26 · answer #6 · answered by thehiddenangle 3 · 0⤊ 1⤋
around 7 years
2006-10-24 11:49:27 · answer #7 · answered by tc 1 · 1⤊ 1⤋
Stay with the seven. There is risk associated with storing documents too long. They can be used against you in legal proceedings and are a wealth of information for identity thieves.
2006-10-25 03:46:17 · answer #8 · answered by Shred Guy 6 · 0⤊ 2⤋
7
the IRS can audit your records up to the last 7 years.
after that... its Kitty litter!
2006-10-24 11:48:35 · answer #9 · answered by xrionx 4 · 1⤊ 1⤋
check with any profession that deals with taxes...the last I remember, it was 8 yrs...could be different now...
2006-10-24 11:49:29 · answer #10 · answered by Anonymous · 0⤊ 1⤋