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How Long Must I keep Tax Records
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Defined Tag: Tax Advisor.
Most tax deadlines are easy to remember like the filing deadline or the due date to pay estimated tax payments however, when it comes to how long to keep tax records, most people do not have a clue. So you want to know, how long to keep tax records?
A tax advisor will tell you until the statute of limitations expires for that tax return. Records that should be kept include receipts, canceled checks, and other documents needed to prove to the IRS your filing was legitimate! This is usually three years from the DUE DATE for the tax return or when the return was actually filed with the IRS or two years from the date the tax was actually paid to the IRS, whichever is LATER. This is generally accepted as the time period in which the IRS can question your tax return.
NB: If you do not file your taxes or file a fraudulent or false tax return there is no statue of limitations. This is what trips up a lot of people, when the IRS comes knocking after 5 years and all of the tax records have been discarded after 3 years. You MUST know, it is the IRS that will claim that a tax return was fraudulent or false. Not filing any taxes at all is self explanatory.
Some tax records should be kept indefinitely, like property tax records. These records will be required to prove to the IRS your gain or loss when you sell the property.
Statute of Limitation provisions differ, here are some you should keep in mind:
You should retain documents verifying the value of real estate or stock until you sell them and realize a gain or loss plus the three-year statute of limitations on the tax return filed after that sale with the IRS.
You may be directed by a tax advisor to keep indefinitely copies of your tax returns. Yes, there is the statute of limitations is 3 years but it will not apply if the IRS suspects it was fraud or filed falsely. Keep those tax returns. Something else to consider is that without your knowledge the IRS changes many returns. The original may be necessary if IRS records are magically different from what you filed.
Tax advisors also suggest you keep tax records that relate to any claim with the IRS for a tax refund or tax credit that was based on bad debts or losses on worthless securities for at least seven years. You may find you need these in the future.
Net operating loss (NOL) can be carried back 2 years and carried forward 20 years. It is very important for you to keep your tax records until all net operating losses are used to offset taxable income and the carry forward term expires. Add the 3 year statute of limitations on the tax returns filed with the IRS that used the carry forward.
Beware: If it is found by the IRS that you understated your gross income by 25% or more the statute of limitations will be doubled to 6 years. Take this advice, if there is anything EVER questioned on your tax return, keep the return and all supporting documentation indefinitely
Also, in a case where a fraudulent tax return has been filed, or no tax return has been filed with the IRS, the IRS can make this assessment at any time.
Finally: An employer must keep all employment tax records for a minimum of 4 years after the taxes are due the IRS or have been paid, which ever is later. The advice and counsel of a qualified tax advisor can not be measured.
Tax Accountant News
| Tax scheme accountant convicted of stealing Thu, 02 Sep 2010 15:26:46 -0700 The manager of a tax minimisation scheme, which lured senior WA police as investors before collapsing and losing millions of dollars, has been convicted of stealing funds from his company's trust account. |
| Madoff accountant pleads guilty Thu, 02 Sep 2010 09:12:22 -0700 The longtime accountant of convicted swindler Bernard Madoff pleaded guilty Tuesday to multiple fraud charges in connection to Madoff's notorious, decades-long Ponzi scheme. |
| County tax request will drop Fri, 03 Sep 2010 02:59:03 -0700 The North Platte Telegraph It appears that Lincoln County's property tax request will decrease. At Monday's board of commissioners meeting, a revised summary was presented that showed a property tax requirement of about $9 million. Taxpayers will pay about 29 cents per $100 of assessed property value, or $160,118 less than last year. |