Q & A and Tips on Accounting, Taxes and Personal Finance.

How long should you keep your tax returns and supporting documents?

February 29, 2016 | By More

How long to retain records for tax purposesHow long should you keep your tax returns and supporting documents?

According to the IRS, the length of time you should keep a document depends on the action, expense, or event which the document records. Generally, 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.

Tu Duo of Dao CPA PC in Houston, Texas provides more detail:

Tu: In general, the IRS has three years from the due date of the return or the date on which the return was filed, whichever is later, to audit and adjust the return. However, the IRS has six years to audit a return if a person fails to report over 25% of gross income. If a return is not filed, or a fraudulent return has been filed, the IRS can audit records for that tax year at any time.

For tax returns and forms W-2, we recommend keeping them at least 7 years or permanently if you could. Your tax returns provide support in case the IRS contends you did not file a return or filed a fraudulent return. Keep forms W-2 in case you need to prove earnings or Social Security and Medicare contribution to Social Security Administration many years later.

For documents that have future tax relevance such as cost of stocks purchased, IRA contributions, closing documents of your houses, improvement costs of the houses etc., you will need these documents to calculate gains or losses when you sell these assets. We recommend keeping these documents at least 4 years after you sell and report the sold assets on your tax return.

In conclusion, how long you should keep your tax records depends on the future tax relevance of the documents.

Contributed by Tu Dao – CPA
Dao CPA PC is located in Houston, Texas. For more information or to contact Tu Dao, visit http://www.accountinginabox.com

Article information should not be used exclusively to make legal, financial or tax decisions. Because laws and rules can change frequently, topics may not always be updated to reflect these changes or may not apply to your unique situation. It’s prudent to seek out the advice of a professional for your specific needs.

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Category: Taxes

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