How to Determine How Long to Keep Your Tax Records
Review the general guidelines the IRS sets forth regarding retention of tax records., Keep most tax records for at least 3 years., Hold on to copies of all your tax returns that you have filed with the IRS indefinitely. , Keep all your tax records...
Step-by-Step Guide
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Step 1: Review the general guidelines the IRS sets forth regarding retention of tax records.
The purpose of keeping your tax records is to support (verify) that items you have claimed as income or that you have deducted from your income, are legitimate and allowable by law.
You must keep all your tax records at least until the period of limitations for a particular tax return runs out. (The period of limitations is the specified time in which the IRS allows you to amend your tax return, to claim a credit or refund or the period of time that the IRS can assess additional tax). -
Step 2: Keep most tax records for at least 3 years.
If your tax return is audited within the statute of limitations, which is usually 3 years, you will need all your receipts, cancelled checks or any other documents that will verify that your deductions were legitimate and allowable by law. ,, This includes any records that relate to bad debts, losses or worthless securities. , A net operating loss for your business can be carried back up to 3 years, but it can also be carried forward 20 years.
If audited, you will have to provide proof of a NOL for the amount of time you carry it forward, in addition to the three-year statute of limitations on your original tax return file date in which you used the carry forward option. ,, -
Step 3: Hold on to copies of all your tax returns that you have filed with the IRS indefinitely.
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Step 4: Keep all your tax records that relate to a claim for a tax refund or a tax credit for a minimum of 7 years.
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Step 5: Keep all records of net operating loss (NOL) indefinitely.
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Step 6: Know that if the IRS determines that you have underestimated your gross income by 25% or more
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Step 7: the statute of limitations is extended from 3 years to 6 years.
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Step 8: Never throw away any document that can verify the basis of your property
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Step 9: such as real estate or stocks.
Detailed Guide
The purpose of keeping your tax records is to support (verify) that items you have claimed as income or that you have deducted from your income, are legitimate and allowable by law.
You must keep all your tax records at least until the period of limitations for a particular tax return runs out. (The period of limitations is the specified time in which the IRS allows you to amend your tax return, to claim a credit or refund or the period of time that the IRS can assess additional tax).
If your tax return is audited within the statute of limitations, which is usually 3 years, you will need all your receipts, cancelled checks or any other documents that will verify that your deductions were legitimate and allowable by law. ,, This includes any records that relate to bad debts, losses or worthless securities. , A net operating loss for your business can be carried back up to 3 years, but it can also be carried forward 20 years.
If audited, you will have to provide proof of a NOL for the amount of time you carry it forward, in addition to the three-year statute of limitations on your original tax return file date in which you used the carry forward option. ,,
About the Author
Michael Lee
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