Retention of Personal Tax Related Documents

Clients often ask for guidance in reference to the retention of income tax records. These records may have to be produced if the Internal Revenue Service (or state or local taxing authority) were to audit your return or seek to asses or collect tax. In addition, lenders, co-op boards, or other private parties may require that you produce copies of your tax returns as a condition to lending money approving a purchase, or otherwise doing business with you.

As a general rule, tax returns should be kept indefinitely and supporting records should be kept for usually six years. Records must me kept as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support items shown on your return until the period of limitations for that return has expired.

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Period of Limitations

• If you file a fraudulent return, Then there is no limitation period
• If you do not file a return, Then there is no limitation period

If the Service claims you never filed a return for a particular year, it can assess tax for that year at any time. Proving that you filed a return would be impossible after you have discarded your return, thus returns should be kept indefinitely.

• If you file a claim for a loss from worthless securities, Then the period is 7 years
• If you omit income greater than on your return, Then the period is 6 years 25% of your gross income filed
• For all other returns, The period is 3 years

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The period of limitations begins on the date the return is filed; unless the return is filed before the due date then the period of limitations begins on the return’s due date. For example, if you file the return on March 20th, the period of limitations would begin on the due date, April 15th. However, if you file on April 20th, then the period of limitations would be on the date filed, April 20th.

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