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How Many Years Should You Retain Your Tax Records?

The IRS says that the length of time you should keep a document depends on the action, expense, or event it records but that, generally, you should keep all records that support an item of income or a deduction on a tax return until the statute of limitations for that return runs out.

The statute of limitations is the period in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax. For most taxpayers, this period is three years from the original due date of the return or the date the return is filed.

The statute of limitations is extended to six years if a return includes a substantial understatement of income. If a taxpayer commits fraud or fails to file a return, there is no time limit for the IRS to assess taxes and fees.

While it’s good practice to maintain income and tax records for one year after than the IRS statute of limitations expires, income records for nontax purposes may be useful years down the road due to insurance company and creditor requirements.

The burden is on you to prove the accuracy of your tax return, and with adequate records, this can be easy. Since the IRS permits electronic copies, converting your paper records could keep you better organized. If you have any questions regarding your specific situation, feel free to call our office.

 


This article was written by a professional financial journalist for Legend Financial Advisors, Inc.® and is not intended as legal or investment advice.




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