1. As a rule, keep your tax records and supporting documentation until the statute of limitations runs for filing returns or filing for refund. For most taxpayers, that means that you’ll want to keep those records for three years following the date of filing or the due date of your tax return, whichever is later.
2. If you don’t report all of the income that you should report (generally, if you omit more than 25% of the gross income shown on your return), the statute of limitations is extended: you’ll want to keep those records for at least six years. You may also want to get a better tax professional.
3. If you file a clearly fraudulent return or if you don’t file a return at all, the statute of limitations never actually runs. That means that there is no time limit on IRS action. In that event, you’ll want to hold onto your records forever. And in that case, you absolutely want to get a better tax professional and possibly a defense attorney on speed dial.
4. If you file a claim for credit or refund after you file your return, you’ll want to keep your records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.
5. If you are a partner or S corporation shareholder, the statute of limitations is generally controlled by the date of your individual return.
6. If you file an amended return, it does not extend the statute of limitations for your original return. The clock doesn’t restart: the original date determines the statute of limitations (some exceptions apply if you file within 60 days of the assessment window).
7. You’ll want to keep supporting documentation for as long as the statute of limitations runs. Supporting documentations for your tax returns includes not only your forms W-2 and 1099 but also bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
8. Don’t forget about those Obamacare requirements. Beginning with the 2014 tax year (the return you filed in 2015), you’ll need to keep records of minimum essential health insurance coverage or proof that you qualified for an exemption or premium tax credit (especially if you had to pay it back).
9. If you make nondeductible contributions to a traditional IRA, hold onto those records until you make a complete withdrawal/distribution: you don’t want to pay tax on those twice. But don’t stop there. As a rule of thumb, you should hold onto all IRA records – including Roth contributions – until you withdraw all of the money from the account.
10. If you claim depreciation, amortization, or depletion deductions, you’ll want to keep related records for as long as you own the underlying property. That includes deeds, titles and cost basis records.
11. If you claim special deductions and credits, you may need to keep your records longer than normal (for example, if you file a claim for a loss from worthless securities or bad debt deduction, you should keep those records for seven years).
12. If you have employees, including household employees, keep your employment tax records for at least four years after the date that payroll taxes become due or is paid, whichever is later. This should include forms W-2 and W-4, as well as related pay information including benefit forms.
13. If you claim any other special tax benefits not mentioned above (for example, the first time homeowner’s credit), a good rule of thumb is to keep your records for as long as the tax benefit runs plus three years.
14. If you own property that will result in a taxable event at sale or disposition (like stocks, bonds or your home), you’ll want to keep records which support your related tax consequences (capital gains, etc.) until the disposition of the property plus three years. That means, for example, that you should keep records related to your home, including home improvements, for as long as you own the house. Remember that you’re entitled to exclude up to $250,000 of gain on the sale of your home ($500,000 if married filing jointly) – so keep excellent records of the cost of the home as well as any improvements or other adjustments to basis.
15. If you receive property as the result of a gift or inheritance, you’ll want to keep records that support your basis in that property. Generally, if you inherit property, your basis is the stepped up value as of the date of death; if you receive a gift, your basis is the same as the donor’s basis. Don’t toss those old records just because you’re the new owner of the assets.
The full article "Tax Records You Should Keep After Tax Day (And How Long to Keep Them)" By Kelly Phillips Erb can be found here.
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