We get this question all the time. How long do I need to keep my tax records? Do I need to keep all these receipts?
First, let’s tackle the question of keeping old tax returns. The IRS does have specific record retention requirements for returns.
The good news is that electronic copies of your tax returns take up relatively little space. Those returns and records can be kept indefinitely. Just make sure you update the method of storage as technology progresses. Also, check with your preparer or software company to find out how long they will keep copies of your returns.
As a tax preparation firm, we are only required to keep certain documents, and not entire copies of returns. Also, we are only required to keep them for a designated amount of time. (The IRS has rules for our record retention as well.) After the required length of time, we may delete our data files. This saves us data space and it is also for our clients’ identity protection that we do not keep old copies.
Paper tax returns, let’s face it, simply take up too much space.
Here are the IRS requirements:
| If you… | The statute of limitations is: |
| 1. Owe additional tax, and situations 2, 3, and 4, below do not apply to you | 3 years after the return is filed* |
| 2. Omit income that is more than 25% of gross income on your return | 6 years after the return is filed* |
| 3. File a fraudulent return | Indefinitely |
| 4. Do not file a return | Indefinitely |
| 5. File a claim for credit or refund after filing* an original return | The later of 3 years after the return is filed, or 2 years after the tax was paid |
| 6. File a claim for loss from worthless securities | 7 years after the return is filed* |
Receipts and other documents which provide back up for your tax return should be kept along with the return for the same required length of time as the return.
Sometimes you may need to keep your tax returns longer than what shows in the table above. Most often this is true when you own property. This property includes real estate, business property, business vehicles, and so on. Records and returns should be kept until the statute of limitations closes (according to the table) on the tax return filed for the year you dispose of the property. This means, selling it, junking it, giving it away, distributing it…
When you are ready to dispose of records and tax returns after the statute limitation, make sure that you do not need to keep the records for some other purpose such as insurance or mortgage purposes.
Contact us if you have any questions or concerns.
Here are links to other blog posts in our Small Business Series: