When you file your taxes, you should be retaining a copy of the tax return and all of the supporting documents to prove your income and expenses. But after five or ten years of filing tax returns, the amount of paper you have to keep can add up. Add all of the other important documents that you need to save and it can seem like you’ll need a storage facility just to keep all of it.
So how long do we need to keep old tax returns and the supporting documents? As usual, IRS has a complicated answer to the simple question:
- Indefinitely: If you do not file a return or file a fraudulent return.
- 7 Years: If you file a claim for a loss from worthless securities or bad debt deduction.
- 6 years: If you do not report income on your return or if there is an issue with the return.
- 4 years: If you owe employment taxes, keep employment tax records for four years from the date the tax is due or paid, whichever is later.
- 3 years: For everyone else, you only have to keep tax returns for 3 years from the date you filed the original return or 2 years from when you paid the tax, whichever is later.
The catch? Most of us won’t know there is an issue with the return right away. IRS is also understaffed, so it can take years before they contact you. It would be unfortunate to throw away records after three years, only to have IRS inform you that there is an issue with your return and you should have kept the documents for six.
So, even though IRS recommends 3 years for most of us, it is probably safer to keep your records for 6 years.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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