The length of time you should keep tax records depends on the action, expense, or event which the records will substantiate. Generally, you should keep records until the statute of limitations period for an audit or assessment of that tax return expires:
- 3 YEARS from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
- 4 YEARS for employment tax records, after the date that the tax becomes due or is paid, whichever is later
- 6 YEARS if there is a chance that the IRS may allege that you under-reported more than 25% of the gross income shown on your return (i.e., a questionable deduction or tax exempt unreported income).
- 7 YEARS if you filed a claim for a loss from worthless securities or bad debt deduction.
- INDEFINITELY maintain a copy of your return, as well as any significant income or expense records that may be needed to defend a claim of an unfiled or fraudulent return, as there is no statute of limitations regarding such.
When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes – i.e., insurance or creditor issues.
If you have any questions or would like further information, please contact James F. Mauro in the Lansing, Michigan office at 517-487-4701.