How long to keep Tax Records

When we are approached with a client with unfiled tax returns it is an easier case for us to handle if the client kept their business and individual tax records. While it is possible to obtain from the IRS one’s income records (W-2, 1099, etc.), the IRS would have no record of most business expenses or individual expenses incured.

Therefore, a natural question is how long should tax related records be kept for if you have filed all your back tax returns. The official guidance form the Internal Revenue Service is three years, since that is the normal time frame to audit a filed tax return. If a taxpayer did not report over a certain amount of income in their filed tax return, the number of years the IRS can go back is six (6) years, for a civil case. If the taxpayer did not file a return, or the tax return filed was viewed as fraudulent, the IRS can go after the taxpayer at any time, even 50 years after the fact.

Because of this almost unlimited timeline, it is always best to keep your tax records for life. Yes, it does sound painful and it is in some ways as people move, but it is even more painful trying to prove to the IRS some fact, when you do not have the tax records. I had a client in 2012 and we asked for tax documents going back to the 1980’s, and they were able to produce them and we won there case and saved them a lot of money.

There are also non-tax reasons to keep the records. The Form W-2 (your wage statement) can be used to verify that the Social Security Administration has the correct earnings records for you.

Therefore, for a good review read the IRS publication 552, record keeping for individuals which is available on the website. With unfiled tax returns, it is best to organize your tax records and any expenses and keep them even if you do not file a tax return.

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