The length of time a document must be retained depends on the action, expense, or event the document records. Generally, records that support an item of income or deductions on a tax return must be retained until the period of limitations for that return runs out.
PERIOD OF LIMITATIONS DEFINED:
The period of limitations is the period of time in which a tax return can be amended to claim a credit or refund, or that the IRS can assess additional tax.
Listed below are the periods of limitations that apply to income tax returns. (Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.)
KEEP RETURNS FOR 3 YEARS IF:
If you file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
KEEP RETURNS FOR 4 YEARS IF:
It is an employment tax record. Keep all such records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
KEEP RETURNS FOR 6 YEARS IF:
You do not report income that you should report, and it is more than 25% of the gross income shown on your return.
KEEP RECORDS FOR 7 YEARS IF:
You file a claim for a loss from worthless securities or bad debt deduction;
KEEP RECORDS INDEFINITELY IF:
You have filed a fraudulent return or you do not file a return;
PAY SPECIAL ATTENTION TO RECORDS CONNECTED WITH PROPERTY:
Records relating to property must be retained until the period of limitations expires for the year in which you dispose of the property in a taxable disposition.
Those records are needed to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.
Generally, if property is received in a nontaxable exchange, your basis in that property is the same as the bases of the property you gave up, increased by any money you paid. Records must be retained on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition.
THE TIME IS UP. NOW WHAT?
Even when records are no longer needed for tax purposes, they should be retained until it is certain they will not be needed for other purposes. For example, an insurance company or creditors may require the records to be held for a period of time beyond what the IRS requires.
IRS Publications:
Publication 535, Business Expenses
Publication 536, Net Operating Losses
Publication 547, Casualties, Disasters, and Thefts (Business and Non-Business)
Publication 594, IRS Collection Process (PDF)
Publication 583, Starting a Business and Keeping Records
Publication 225, Farmer's Tax Guide
PERIOD OF LIMITATIONS DEFINED:
The period of limitations is the period of time in which a tax return can be amended to claim a credit or refund, or that the IRS can assess additional tax.
Listed below are the periods of limitations that apply to income tax returns. (Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.)
KEEP RETURNS FOR 3 YEARS IF:
If you file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
KEEP RETURNS FOR 4 YEARS IF:
It is an employment tax record. Keep all such records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
KEEP RETURNS FOR 6 YEARS IF:
You do not report income that you should report, and it is more than 25% of the gross income shown on your return.
KEEP RECORDS FOR 7 YEARS IF:
You file a claim for a loss from worthless securities or bad debt deduction;
KEEP RECORDS INDEFINITELY IF:
You have filed a fraudulent return or you do not file a return;
PAY SPECIAL ATTENTION TO RECORDS CONNECTED WITH PROPERTY:
Records relating to property must be retained until the period of limitations expires for the year in which you dispose of the property in a taxable disposition.
Those records are needed to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.
Generally, if property is received in a nontaxable exchange, your basis in that property is the same as the bases of the property you gave up, increased by any money you paid. Records must be retained on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition.
THE TIME IS UP. NOW WHAT?
Even when records are no longer needed for tax purposes, they should be retained until it is certain they will not be needed for other purposes. For example, an insurance company or creditors may require the records to be held for a period of time beyond what the IRS requires.
IRS Publications:
Publication 535, Business Expenses
Publication 536, Net Operating Losses
Publication 547, Casualties, Disasters, and Thefts (Business and Non-Business)
Publication 594, IRS Collection Process (PDF)
Publication 583, Starting a Business and Keeping Records
Publication 225, Farmer's Tax Guide
HOW LONG SHOULD TAX RECORDS BE MAINTAINED?
ROBERT M PHILLIPS
Attorney & Counselor at Law