How long to hang on to your tax returns
As individuals attempt to more effectively organize their homes, they may come across a familiar pile of documents that they might hesitate to discard. Conventional wisdom has suggested taxpayers hold on to their tax returns for at least seven years. However, the Internal Revenue Service indicates that the seven-year timeline is not necessarily applicable to everyone. The IRS recommends taxpayers speak with their insurance company or creditors to see if they require account holders to hold on their tax records longer than the IRS. If they don’t, individuals can follow these guidelines, courtesy of the IRS.
1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
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, if you file a claim for credit or refund after you file your return.
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 percent of the gross income shown on your return.
5. Keep records indefinitely if you do not file a return.
6. Keep records indefinitely if you file a fraudulent return.
7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
These can serve as guidelines taxpayers can follow if they are attempting to declutter at home but don’t want to discard tax returns they might someday need. Taxpayers also can consult with their accountants or tax preparers for advice on how long to keep their returns. In addition, those who want to keep their returns can scan relevant return documents and then store them digitally on an external hard drive. This frees up space in a home and can calm any fears about discarding returns taxpayers may have.