Even though tax records could take up a file cabinet, many of us are willing to keep them. Do not allow fears about identity theft or a tax audit to control you whenever you do. When it is time to file your taxes, there are safe ways to get rid of your tax papers, so you are not required to keep them around for very long. Contact tax services in Slope Park, Brooklyn, to know more about how long you should keep your tax records.
How to Keep Your Tax Records For a Long Time and When Should You Dispose Them
You should keep your tax documentation as per the IRS’s statute of limitations. This is usually valid for three years, during which you can make modifications to your return, and the IRS can levy additional fees.
The IRS statute of limitations, however, occasionally surpasses three years. Because of this, depending on your tax position, the IRS suggests keeping tax records for varying lengths of time:
- In most cases, you should maintain your tax records for three years from the day you first filed your income tax return or two years after the date you paid the tax. It includes any paperwork concerning prospective tax deductions. Additionally, it is essential to maintain documents that are structured and readily available in case of an IRS investigation.
- Keep the tax records for six years if you did not report income that should have been reported, and this revenue accounts for more than 25% of your gross income on your tax return.
- Keep tax documents for seven years if you claim a loss from worthless assets (such as stocks) or a bad debt deduction.
Are there any particular tax documents that you should keep for a longer time?
There are certain exceptions to the following requirements for specific types of tax documents:
- Employment tax records should be maintained for at least four years after the day that you paid the tax or the date the tax was payable (whichever is later).
- Property records (real estate, stocks, personal belongings, etc.) should be preserved until the statute of limitations for the year in which the property has been disposed of expires.
- Other nontax papers may need to be maintained for a longer time in order to satisfy whoever provided you with the form; for example, a lender or insurance company might ask you to preserve their records longer than the IRS.
