If you’re looking to clean out your files this summer, here are some handy guidelines for how long certain files should be kept.
Different tax professionals will give different answers for how long you should keep records, and even the guidance from the IRS can be confusing. In general, I recommend that you keep supporting documents for your tax returns for at least 6 years. The tax returns themselves, and your copy of your W-2, should be kept forever. That last bit of advice might seem extreme, but if there is ever a dispute with the Social Security Administration over what your wages were for a certain year, you will want solid documentation.
Documents that prove your basis in an asset should be kept for as long as you own the asset, plus an additional 6 years after you sell the asset.
The IRS generally has 3 years to assess additional tax against you, but the statue of limitations increases to 6 years if you failed to report income you should have reported and it amounts to more than 25% of your income for that year. Most of us report our income properly, so it would probably be okay to shred supporting documents after 3 years. But you never know when the IRS might decide to audit you, so to be safe, I would still recommend keeping those documents for 6 years.
Keep in mind that there is no statute of limitations in the case of fraud, or if you never filed a return for a particular year.
“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”