How Long Should You Keep Tax Records?
According to the Internal Revenue Service, the amount of time you should retain a document depends on what the document records. The length of time to store records depends on the type of information they contain.
The period of limitations is the amount of time during which you can update your tax return to request a credit or refund, or the agency can assess additional tax. The information below indicates the periods of limitations for income tax returns.
IRS Recommendations for Period of Limitations regarding income tax returns
1. Store records for three years if situations (4), (5), and (6) below do not apply to you.
2. Hold onto records for three years from the date you filed your original return. If you amended your return and requested a refund or credit, retain your records for two years, whichever is later.
3. Retain records for seven years if you claim for a loss from worthless securities or bad debt deduction.
4. Store records for six years if you do not report income that you should report, and it is more than 25 percent of the gross income reflected on your return.
5. If you do not file a return, keep records indefinitely.
6. If you submit a fraudulent return, you are urged to keep records indefinitely.
7. Store employment tax records for a minimum of four years after the date that the tax bill is paid or becomes due, whichever is later.
One of the best ways to store your important tax documents is in a fireproof safe. Along with those records, you can store other important documents like the deed to your house, mortgage and insurance information, your bank documents and your will.
If you want to keep your records for a long time, but you are running low on storage space, consider scanning your documents and keeping a backup of the files on a cloud service. The IRS now accepts digital copies of legible documents.