How Long is Too Long to Retain Old Tax Records?

  • The assessment period is extended to six years if a taxpayer underreports more than 25% of his or her gross income from the tax return.
  • The IRS can assess additional taxes well into time and memorial when a taxpayer has been “naughty.” This means that the statute of limitations for assessing taxes is suspended indefinitely, giving the IRS license to assess stiff penalties for tax years that might go back as far as the ice age. In other words, there is no statute of limitations. The following circumstances are par for the course: (a) the taxpayer doesn’t file an income tax return, (b) the taxpayer files a false or fraudulent return with the intention to evade taxes, or © the taxpayer deliberately tries to evade tax in any other manner. With respect to (a), the three-year statute of limitations is triggered only when you file an income tax return. If you never filed a return, then you can’t raise the statute of limitations as a defense because the clock never started to run. After submitting your tax return, be sure to confirm that the IRS has received it. As a vast bureaucracy that dwarfs the governments of many small nations, the IRS has been known to misplace returns. This may explain why the very first thing the IRS asks for when auditing a taxpayer is a copy of the original tax return. More often than not, it comes down to convenience. It’s easier to ask the taxpayer for a copy of the return instead of having to dig for it in the catacombs of the IRS’s storage vault. The tragedy in this is that if you don’t have a copy of your return, the IRS will assume that you never filed one. This is why you can never be too careful when dealing with the IRS and I dare say, may even want to retain proof of having filed the return. That would mean a signed certified mail receipt if you filed by mail or the confirmation email or web page print-out from an electronic filing.
  • The IRS has unlimited time to assess additional tax when a taxpayer files an unsigned return.
  • W-2’s.
  • Stock acquisition data. If you own stock in a corporation, keep the purchase records for at least 4 years after selling the stock. The purchase data is needed to prove the amount of profit (or loss) that you had on the sale.
  • Statements for stocks and mutual funds with reinvested dividends. Many taxpayers use the dividends that they receive from a stock or mutual fund to buy more shares of the same stock or fund. These reinvested amounts contribute to the basis of the property and reduce the gain when it is eventually sold. A good practice is to retain these statements for a minimum of four years beyond the date of final sale.
  • Tangible property purchase and improvement records. It is a good practice to keep records of home, investment, rental-property or business-property acquisitions, as well as all related capital improvements, for a minimum of four years beyond the date that the underlying property is sold.
  • Online Using Get Transcript. Use Get Transcript Online on IRS.gov to view, print or download a copy for any of the transcript types. Users must authenticate their identities using the Secure Accessprocess. Taxpayers who are unable to register or who prefer not to use Get Transcript Online may use Get Transcript by Mail to order a tax return or account transcript.
  • By phone. The number is 800–908–9946.
  • By mail. Taxpayers can complete and send either Form 4506-T or Form 4506T-EZ to the IRS to receive a transcript by mail.

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Michael DeBlis

Michael DeBlis

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Michael is an attorney specializing in entertainment law and a professionally-trained actor. He is a partner in the law firm of DeBlis Law.