More people are filing taxes online than ever.
When it comes to tax returns, the rule of thumb is to store those suckers for seven years in case the Internal Revenue Service or state government has some questions.
But for most taxpayers, that’s probably overdoing it.
How long you should keep them – and any supporting documents such as W-2s and 1099s – depends on your tax situation for the year and when that period of limitations for that tax return runs out.
The period of limitations is how long you have to amend your tax return to claim a credit or refund, or how long the IRS has to assess additional tax.
Most taxpayers: Three years
The statute of limitations for an IRS audit expires after three years. That means most taxpayers should keep their tax records for three years after the date they filed their return, or two years after they paid tax – whichever is later.
Real estate ranking: Buying a house? Here are 10 cities with the biggest increase in homes for sale
There are three exceptions to the IRS audit time limit. The agency can go back six years for an audit if you under-reported your gross income by 25 percent or more.
The IRS can also audit returns that claim a capital loss on worthless securities or take a deduction for bad debt, up to seven years after the return was filed.
If you didn’t file a tax return or filed a fraudulent one, there is no statute of limitations for an IRS audit. In these cases, keep all your records indefinitely.
Thank you! You’re almost signed up for
Keep an eye out for an email to confirm your newsletter registration.
Other tax-related documents
The IRS also recommends taxpayers hold onto employment tax records for at least four years after the date that the tax is due or paid – whichever is later.
With stocks, bonds or property, maintain records until you sell the asset. For instance, you may need this documentation to determine depreciation or amortization as well as calculating a gain or loss after the sale.
State tax requirements
You may need to keep your tax records longer, depending on the statute of limitations for audits in the state where you live. For instance, California has a four-year statute of limitations. If your state return under-reports income or contains false information, that period could be longer. Check with your state tax authority for more information.
It’s tax time again. In your rush to get your taxes done, don’t make these six mistakes.
Josmar Taveras, USA TODAY
Read or Share this story: https://www.usatoday.com/story/money/2019/03/07/filing-taxes-how-long-should-keep-my-tax-returns/3092751002/