Tired of having all those old tax records taking up drawer or closet space and collecting dust. Want to dump as much as you can? People often ask how long records must be kept and the amount of time IRS has to audit a return after it is filed.
How long to keep the records depends on the circumstances! In most cases, the federal statute of limitations can be used to help you determine how long to keep records. With certain exceptions, the statute for assessing additional tax is 3 years from the return due date or the date the return was filed, whichever is later.
However, the statute of limitations for many states is one year longer than the federal limitation. The reason for this is that the IRS provides state taxing authorities with federal audit results. The extra time on the state statute gives states adequate time to assess tax based on any federal tax adjustments.
In addition to lengthened state statutes clouding the recordkeeping issue, the federal 3-year rule has a number of exceptions:
If no exception applies to you, for federal purposes, you can probably discard most of your tax records that are more than 3 years old; add a year or so to that if you live in a state with a longer statute.
Examples: Susan filed her 2016 tax return before the due date of April 17, 2017 (the 15th fell on weekend). She will be able to safely dispose of most of her records after April 17, 2020. On the other hand, Don filed his 2016 return on June 1, 2017. He needs to keep his records at least until June 1, 2020. In both cases, the taxpayers may opt to keep their records a year or two longer if their states have a statute of limitations longer than 3 years.
Important note: Even if you discard backup records, never throw away your file copy of any tax return (including W-2s). Often the return itself provides data that can be used in future tax return calculations or to prove amounts related to property transactions, social security benefits, etc. You should also keep certain records for longer than 3 years. These records include:
Tax return copies from prior years are also useful for the following:
The IRS Can Provide Copies of Prior-Year Returns – Taxpayers who have misplaced a copy of a prior year’s return can order a tax transcript from the IRS. This transcript summarizes the return information and includes AGI. This service is free and is available for the most current tax year once the IRS has processed the return. These transcripts are also available for the past 6 years’ returns. When ordering a transcript, always plan ahead, as online and phone orders typically take 5 to 10 days to fulfill. Mail orders of transcripts can take 30 days (75 days for full tax returns). There are three ways to order a transcript:
Those who need an actual copy of a tax return can get one for the current tax year and for as far back as 6 years. The fee is $50 per copy. Complete Form 4506 to request a copy of a tax return and mail that form to the appropriate IRS office (which is listed on the form).
If you have questions about which records you should retain and which ones you can dispose of, please give this office a call.