Tax Records - What You Should Keep And For How Long
Below is a MRR and PLR article in category Finance -> subcategory Taxes.
Tax Records: What to Keep and How Long to Keep Them
Summary
Many people are unsure about the duration for which they should retain their tax records. "Tax records" encompass your tax returns and all supporting documents like receipts, bank statements, and 1099s. These records are essential if you're ever audited by the IRS.Tax Returns
To safeguard yourself against potential audits, keep all your tax returns indefinitely. The IRS handles millions of returns annually, and misplaced returns are not unheard of. Protect yourself by keeping copies of every tax return.If you file electronically through the IRS e-file program, ensure you receive paper copies from the company that files your return, as they are legally obligated to provide them.
Supporting Tax Records
Maintain supporting records for six years from the filing date. Typically, the IRS has three years to audit you from when you file. For instance, if you filed your 2000 tax return on April 15, 2001, the IRS would have until April 15, 2004, to initiate an audit. If you requested an extension, the audit window starts from when you submitted the return.However, if your return fails to report more than 25% of your income, the IRS has an additional three years. In the previous example, this would extend the audit period to April 15, 2007.
Property Records
It might be wise to invest in a filing cabinet if you own property for an extended time. For instance, if you bought a home in 1980 for $100,000 and later made improvements worth $50,000, you need to keep all purchase records and receipts for those improvements. When selling, these documents help determine your tax obligations. After selling the property, retain all tax records for an additional six years.Divorce
In case of a divorce, retain copies of all financial documents, tax returns, and supporting records. Keep all divorce agreements and court orders related to property and finances. Without these records, you might have to seek them from your ex-spouse, adding to potential stress.Conclusion
Hopefully, you will never need to produce your tax records for the IRS. However, if you are audited, having thorough records will be invaluable in protecting your interests.You can find the original non-AI version of this article here: Tax Records - What You Should Keep And For How Long.
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