By law, you must keep your tax records for as long as they are needed for the administration of the Internal Revenue Code. Generally, this means you must keep the documents supporting the income and deductions shown on your tax return until the statute of limitations for that return expires.
The IRS has three years from the date you filed your return to assess any additional taxes you owe. If you did not report all of your income and it is more than 25% of the gross income you reported on your return, the IRS has six years from the filing date of the return to assess additional taxes. If you failed to file a return or filed a fraudulent return, there is no statute of limitations preventing the assessment of additional taxes.
You have three years from the date you filed your return or two years from the date you paid the tax (whichever is later) to file a claim for credit or refund. If you filed your return prior to the due date, it is considered filed on the due date.
The following are some general rules for determining how long to maintain your important personal tax records.
Federal and State income tax returns
These should be kept for a minimum of three years, although it may be more prudent to keep them for six years since the IRS can go back that far if there is a material misstatement of income. Also, keep the registered mail receipts with the return.
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- Supporting documents such as W-2s, 1099s, cancelled checks, etc.
which verify income and deductions. These should be maintained
with for the same length of time the tax returns on which the information
was reported.
- Residential property. You should keep all settlement records for
home purchases and any records relating to improvements that
were made for as long as you own your home. If you sell your
home, you should maintain these records for as long as you keep the tax
return filed for the year of sale.
- Investment property such as stocks, bonds, mutual funds, etc.
You need to maintain records showing the purchase date and
purchase price for each individual investment for as long as you
own the investment. When you sell an investment, these records
will be used to determine whether you have a gain or loss and
if the gain/loss is short term or long term. Maintain the records
related to the sale of an investment with the tax return on which
the sale was reported.
- Nondeductible IRA contributions. These records need to be
maintained indefinitely. They will be needed to determine the
non-taxable portion of your required IRA distributions.
- Depreciable property. For all rental real estate or depreciable
property, you need to maintain records showing the purchase
date, cost of the property, the date and cost of any improvements
to the property, a depreciation schedule showing the
method used and the depreciation taken for all the years that
you owned the property. These records should be kept until you
sell or dispose of the property and should be kept with the tax
return on which you report the sale.
- Personal records such as birth certificates, marriage licenses,
divorce agreements, wills, copies of estate and gift tax returns, etc.
These should be maintained in a permanent file. These are important
documents that may be needed to verify information on a tax
return but are also needed in various life situations.
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