How long am I required by law to retain copies of past tax returns?
You look in your records bin and see that you’ve run out of room for this year’s tax returns. You need the room to stow the latest set but are afraid to remove old forms in case something comes up. What to do?
If old copies of past tax returns are taking over your storage containers then fear no longer. Here are some general rules to follow when it comes to keeping them around versus tossing them.
The IRS has a set number of guidelines to follow for keeping old copies of past tax returns. While you may not be required by law to hold on to them, some issues may arise in the future where having your old taxes around could come in handy.
These guidelines are dependent on two factors: how long you can amend your past tax returns and how long the IRS can assess them for additional tax.
- Did you file a fraudulent return? Keep your records forever. (Of course, if you knowingly filed a fraudulent return, you are probably not very concerned about record keeping! But these are the IRS's words. Not ours!)
- Did you not file a return one year? Keep your records forever.
- Did you forget to report income and it’s 25% of your gross income? Keep your records for 6 years.
- Owe additional taxes and the above situations do not apply? Keep your records for 3 years.
- You file a claim for credit or refund after you file your return – keep your records for 3 years from the date you filed your original return, OR years from the date you paid the tax, whichever is later.
- You file a claim for a loss from “worthless securities” or bad debt deduction? Keep records for 7 years.
- Keep all employment tax records for at least 4 years after the date becomes due or is paid, whichever is later.
There are also guidelines set up for when you think it’s time to throw away copies of past tax returns. The general rule is that if the records are connected to any assets, like property, you should keep them around for the duration of the ownership.
Other past tax returns that are not needed for tax purposes should be thrown out only if you don’t need them for anything else. For instance, your insurance company may need you to keep them around for even longer than the IRS.