The Peck Group, LC - Tax Law
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How long should I hold onto my income tax records?

| Oct 10, 2018 | Audits |

The conventional guidance on income tax returns is to file every year, and hold onto your tax records for at least three years after you file. However, there are certain situations under which those guidelines change—and additional factors that redefine those guidelines altogether.

In today’s post, we explain why it may be advantageous to keep your records for longer.

Reassessing the three-year rule

Typically, the IRS advises you to retain your tax records for three years after you file. This deadline was established because:

  • The IRS has three years from the time you file to audit your tax return and
  • You have three years from the time you file to submit an amended tax return.

However, under certain circumstances, you should keep your tax records for longer than that.

  • If you failed to claim all of your income on your tax return—and that income represents at least 25 percent of your total income—then the IRS can audit you up to six years after you file.
  • If you filed a fraudulent return—or failed to file a return at all—then the IRS can audit your case at any time. In this case, you should keep your tax records indefinitely.

Deciding what to keep

Another important thing to understand is how the IRS keeps records. You might think that if you file electronically, the process is fool-proof—and the IRS will keep your return permanently on file. However, the IRS only stores what are known as tax return “transcripts”—not complete returns. If they suspect you of foul play—even from years preceding the three-year mark—they will ask you to supply a copy of your tax return as proof.

Therefore, it’s a good idea to keep hard copy or PDF versions of every tax return you’ve ever filed. However, you’re not expected to keep the supporting tax documentation for any given tax year for longer than three years past your return submission date.

When it comes to dealing with the IRS, you want to be sure to dot all your i’s and cross your t’s. Holding onto your tax returns is one way of avoiding unnecessary tax stress.

We insist that your taxpayer rights are protected and your options are known.

Our services are confidential and are protected under the attorney-client privilege as allowed by law.