Tax Records When Can They Be Dumped

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by: jemarwright | Total views: 3 | Word Count: 329 | View PDF | Print View
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There is no clear cut answer to how long these tax records have to be kept. The IRS suggests that the supporting records be kept as long as they remain important to the federal tax law. This means that you should be saving every receipt, every canceled check, and other proof of income, exemptions, exclusions, deductions, credits deferrals etc, at least until the statute of limitations is crossed. The statute of limitations is the period after with the tax people cannot come knocking at your door and even you will not be able to recover any extra payment you have made to the tax authorities.

Usually the IRS can only take action within three years since the return has been filed by you. Once these three years are over, you may throw out your records that show your income and expenses, including canceled checks etc.

Well, since nothing really is a fixed rule where tax returns are concerned, there are exceptions to this rule, which are not applicable to most people.

One exception is that the IRS has the capacity to make the audit deadline six years instead of three years, if the income that is not reported on the return is 25% more than what is shown on the return. The next exception is that there IRS does not have any time limits for going after people and if in case you happen to fail to file returns or the return that you filed is considered false, then the audit can take place whenever IRS deems fit. These two situations are exceptions to the three year rule.

This makes it important for us to keep the returns indefinitely and it’s not as if people do not have space to store them. Keep the returns and the tax related documents safely forever is very possible and the most efficient way to dealing with your finances.

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