18 Jul Keeping Good Tax Records: IRS Publication 583
In a tax emergency, would you be ready? Well– good tax records not only help you prepare your tax return. They also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.
Fortunately, you don’t have to keep all tax records around forever. There are laws known as statutes of limitations that impact how long you must keep receipts, canceled checks, and other documents that support an item of income or a deduction on your return.
Generally, for questioning the amount of tax you reported or making an assessment of additional tax, the IRS has 3 years from the date you filed the return. For filing a claim for credit or refund, you generally have 3 years from the date the original return was filed, or 2 years from the date the tax was paid, whichever is later. For either purpose, returns filed before the due date are treated as filed on the due date. There is no statute of limitations when a return is fraudulent or when no return is filed.
You should keep some records indefinitely, such as property records. You may need them to prove the amount of gain or loss if the property is sold.
Generally, income tax returns should be kept for 3 years from the date the return was filed. They could help you prepare future tax returns or amend a return.
For more information on recordkeeping requirements for individuals, order Publication 552, Recordkeeping for Individuals.
If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.
If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.
Additional info – required documentation for taxpayers with business expenses: