Individual Taxpayer Records
Individual Taxpayer Records and for How Long To Keep Them
Filing your taxes isn't just a once-a-year endeavor. Maintaining good records throughout the year - and disposing of old ones when appropriate - not only provides you with greater confidence now when you prepare your tax return, but it also provides you with documentation you may need down the road.
Lucky Number Seven
One of the most common questions we're asked is, how long should I keep my tax returns? Although you can get away with keeping them only three years, we recommend you keep all federal and state income tax returns and supporting documents for a full seven years.
Why so long? Once you've filed your returns, the IRS has up to three years to assess additional taxes. However, it can take up to seven years to make a tax assessment if it determines that you omitted a substantial amount of income from your return. You may believe your returns are accurate and all-inclusive, but the IRS may feel differently.
Be sure to file your US Postal Service or electronic mailing receipts with your returns, also. If your return is ever lost or misplaced, having a receipt showing the date the return was submitted will save you from penalties.
File It, But Don't Forget It
Some events produce documentation that should be kept permanently: settlement records from all of your home purchases and sales, investment purchases, marital documents, etc.
But just because an event ends doesn't mean that the documentation process should. Before you move your records to the attic, remember that regularly filing "updates" - home improvement receipts, records that show a return of capital on your investments, estate and gift tax returns under which you received property, etc. - will help to compute your gain/loss when you sell.
There are other situations in which you would benefit from keeping your records, including any nondeductible contributions you have made to an IRA or Roth IRA. Review your personal and financial history with a professional to ensure you have all your bases covered.
We welcome the opportunity to meet with you to discuss your personal situation.