People wonder this often. There is no hard and fast rule to make everyone happy. “Keep everything for 7 years” doesn’t really cut it. In some cases it may, but there are situations where you are required to keep documents and records indefinitely.
According to the IRS “you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.”
Not very helpful, right?
The deadlines for filing amended tax returns to claim a credit or refund or for the IRS to assess additional tax come in to play for the period of limitations.
- ♦The 7-year rule works if you file a claim for a loss from worthless securities or bad debt deduction.
- ♦You need to keep records indefinitely if you do not file a return.
- ♦As entertaining as this may sound, you need to keep records indefinitely if you file a fraudulent return (just don’t do this! I mean, keep the records but don’t file fraudulent returns!)
- ♦You should hold on to employment tax records for 4 years after the tax becomes due or is paid, whichever is later.
There is more detail on the IRS’s Website dealing with records….
Visit the IRS Website for other recordkeeping information including why you should be keeping records, the types of records to keep, burden of proof and how to record business transactions.
Keep in mind, you can keep your records electronically. You don’t need to have boxes and boxes of paper laying around. You just need to be able to provide the IRS with a legible copy should they request it. Just make sure you’ve got your systems backed up if you have them saved to your computer.