The general rule is to keep tax records for at least three years. But there are many situations where you may want to keep records for longer than that if you want to protect yourself in the case of an IRS tax audit.
The Three-Year Rule
The IRS has three years to assess tax, so it makes sense to keep records for three years. Unfortunately, tax law is rarely simple, so there are a lot of cases where three years isn’t enough.
Consider three years the minimum, but be aware of cases where records should be kept for longer periods.
The Six-Year Rule
The IRS has six years to assess tax if you understated more than 25% of your income. If the IRS believes you committed a substantial understatement, you’d better hope you kept your tax records for at least six years if you need to defend yourself during an audit.
Six years is also the statute of limitations used for FBAR penalty assessments, so you may want to kept records relating to your foreign accounts for at least this long.
There is no statute of limitations if you have committed tax fraud or if you never filed a return. Some people who have no filing requirement may prefer to file a return anyway to start the running of the statute of limitations.
If you own property—such as real property—you should keep records for as long as you have the property. The property’s adjusted basis will be used to figure your gain whenever the property is sold, so you could need several decades’ worth of records related to the property.
The IRS also makes errors sometimes. They may erroneously believe that you failed to file a return for a year more than three years ago. If you have proof that you filed the return, it could make it much easier to resolve the problem.
If you don’t have tax records, there are still ways to file old returns and resolve your tax problems. Contact a tax attorney for assistance with IRS audits or unfiled tax return issues.
The Gartzman Law Firm handles IRS tax audits and other tax resolution cases. Use our contact form to request a consultation with an Atlanta tax resolution attorney.