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Tax Record Retention Guide

How long should you keep tax records?

The length of time you should keep a document depends on the action, expense, or event which the document records.Generally, you should keep tax returns and the records that support an item of income, deduction, or credit shown on the return until the period of limitations runs out. The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.

Period of Limitations that apply to income tax returns:
1.) Keep records for 3 years unless: (a) you have not filed an original tax return, (b) tax return has unreported income of 25% of more, or (c) the filed return is fraudulent.

2.) Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax (whichever is later).

3.) Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.

4.) Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.

5.) Keep records indefinitely if you have not filed a return since the period of limitations doesn't start running until you file a return.

6.) Keep records indefinitely if there is a chance that a fraudulent return was filed.

7.) Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

If the records are connected to property, keep the property related records until the period of limitations expires for the year in which you dispose of the property. If you received property in a nontaxable exchange, you must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property. 

When records are no longer needed for tax purposes, you should check to see if you have to keep them longer for other purposes. For example, your insurance company or creditors may require you to keep them longer than the IRS does.  Shred all documents that are being disposed of to reduce the risk of identity theft.