When Can You Stop storing Tax Records?

In case you ever get audited, it is best to store your tax records, instead of throwing them away. Unfortunately, you'll end up storing more papers and documents than you need to store. However, most people have absolutely no idea whatsoever when it comes to being aware of how long they have to keep tax records before they can finally discard them and throw them into the trash. There's the worry that the IRS might come knocking when old tax records are discarded. So when it comes to storing tax records, what's the real truth? How long before you can discard them and not fear of IRS problems?

The statute of limitations officially implemented by the Internal Revenue Service is the first criteria. Within ten years, the IRS can still audit your tax records. They can no longer collect those taxes or audit those returns after that. This statute of limitations is put in place because essentially, records can get lost. Your IRS issues essentially disappear after ten years, even if you can no longer pursue refunds after this period.

Beginning on the date of the filing of the original tax return is the three-year assessment for additional taxes as the second criteria. As an exception to this rule, claiming a loss on worthless security extends the statute of limitations to seven years. Another exception is when there are unreported portions of your total gross income totaling 25%, the statute of limitations is increased to six years. Lastly, if you file a fraudulent tax return, or don't file one at all, there is no statute of limitations.

You must do a true examination of your chances of being audited when determining which documents to store or discard. These are the documents which would support your case in the event of an audit by the IRS. If, for any reason, you believe that you might be audited, you'll want to keep documents like records of your capital gains and losses, expenses on your home, tax returns, brokerage, bank and employment statements, and business records. When fighting an IRS audit, these documents are the center of your case. So that you are prepared against IRS issues, save these documents for the full ten-year statute of limitations period if you think there is a good chance that you will be audited.

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