While we are not tax professionals at our firm, tax planning is a significant part of the financial planning and investment management process that we go through with clients, in collaboration with their tax professionals.
And so, it makes sense we get asked a lot of questions relating to taxes. One such question is how long does one need to keep tax documents? Is it three years, six years, seven years? Forever?!
To answer the question, we went to the source for all things taxes, the IRS website, and thought we’d share a few of the more common regulations with you.
Hopefully this list helps you do a little spring cleaning of your records, allowing you to shred the old stuff you don’t need, make room for the new stuff you do need, and get you feeling a little more organized.
Three Years
- Keep ALL tax records for three years (three years from the date you file)
- You would keep all the records you would need to basically re-create your tax return from scratch if you needed to
- The IRS statute of limitations for filing audits is three years (this assumes no fraud was committed)
Six Years
- Keep records for six years, just in case, if: you have income that you’re not sure has to be reported, and then decide not to report, and it equals more than 25% of the gross income shown on your return (side note: we recommend you report all income that is reportable)
Seven Years
- Keep records for seven years if: you file a claim for loss from a worthless security or bad debt deduction
Indefinitely
- If you do not file a return, keep all of your tax records indefinitely (we strongly suggest you file unless your tax counsel tells you there’s no need to)
- If you file a fraudulent return (please don’t), keep all records indefinitely
- If you have records connected to a property, keep these records indefinitely (or at least until the period of limitations expires for the year in which you dispose of the property)
Happy cleaning!
Your IWC Team
Disclaimer: we are not tax professionals. Please always consult your tax professionals for tax advice.
