How long to keep tax records
Updated: Aug 4
In closets, storage bins, and attics across the country, boxes filled with old tax returns can be found collecting dust. We all can recall that 10 or 20-year-old paper scent. That paper smell screams of an individual who does not know how long he or she needs to keep their tax records. Since most people will not want read through IRS tax law and since there was not a Super Bowl commercial informing Americans on the rules and regulations, hopefully the information below will help (and will be much cheaper than 5 million dollars for 30 seconds).
For the vast majority of Americans with simple tax returns, records need to be kept from the previous three years’ tax filings. Assuming taxes are filed annually on April 15th, any records before 2014 do not need to be kept. So, the three years of tax returns that need to be kept currently are 2016, 2015, and 2014, assuming you have already filed your 2016 taxes.
There are a few exceptions to this rule that require prolonged holding periods:
– If you do not file a tax return in one year, all supporting documents should be kept indefinitely.
– Keep employment tax (FICA) records for four years.
– If a fraudulent return is filed, records should also be kept indefinitely.
– If you claim a loss of bad debt or worthless security, returns need to be kept for seven years.
– Keep records for six years if you had income, that should have been reported and is over 25% of gross income.
Hate keeping paper for even the most recent three years? Go ahead and scan all of the documents to be stored electronically.
Feel free to reach out with any questions,
Evan Werckenthien, CFP©
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