Taxes— no one likes to talk about them, look at them, or think about them, so once they’re filed, the residue of receipts paystubs, and records are stored away in some attic of unmentionables never to be seen again. However, many may wonder how far back in time their tax records must be kept because, simply said, there’s only so much attic space available.
The simple answer is 3 years for the following reason:
The IRS generally has three years after the due date of your return (or the date you file it, if later) to initiate an audit, so you should keep all of your tax records at least until that time has passed.
This recommendation is confirmed by the Internal Revenue Service (IRS). Tax papers connected to property are similar in that you should keep those records until the property they are connected with is disposed or sold. However, there are certain circumstances where three years won’t cut it for a the best record keepers.
One example is bad debt deduction. In simple, bad debt deduction is when you’ve loaned someone money and, for some unfortunate reason, you cannot collect it. The IRS advises keeping records of such transactions for at least 7 years.
Another example deals with your tax return. If 25% or more of the gross income (all money earned before taxes) is not reported on the tax return form when it should be, those records need to be kept for 6 years.
Your insurance company or creditors may require you to keep tax records longer than the IRS does.
There are even files you should keep indefinitely! This includes all files from when you do not file a return, files from if you file a fraudulent return, and files your insurance company or creditors may require you to keep.
