Stop storing Those Tax Records
In case you ever get audited, it’s better to store your tax records, rather than throwing them away. Unfortunately, this can result to saving more documents and papers than you really need to save. But many people don’t know how long they need to store tax records before disposing of them. The constant fear that once the old tax records are discarded, the IRS might come knocking. So when it comes to keeping tax records, what is the honest truth? How long before you can discard them and not worry about IRS problems?
The statute of limitations officially implemented by the Internal Revenue Service is the first criteria. The IRS can audit your tax records within ten years. They can no longer collect those taxes or audit those returns after that. Essentially, records can get lost; therefore, the implementation of the statute of limitations. So even if you can no longer pursue refunds beyond this 10-year period, your IRS problems also basically disappear.
Beginning on the date of the filing of the original tax return is the 3-year assessment for additional taxes as the second criteria. As an exception to this rule, claiming a loss on worthless security increases the statute of limitations to 7 years. As another exception, the statute of limitations is extended to 6 years when unreported percentages of your total gross income amount to 25%. Finally, if you file a fraudulent tax return, or don’t file one at all, there is no statute of limitations.
When deciding which documents to save and which ones you have to discard, you should conduct an honest examination of your chances of being audited. In the event of an IRS audit, these documents will back up your case. You will need to keep documents like business records, employment, bank, and brokerage statements, tax returns, expenses on your home, and capital losses and gains if you believe, for whatever reason, that you might be audited. When battling an IRS audit, these documents are the center of your case. If you feel that you have a good chance of being audited by the IRS, then by all means, save these documents for the entire 10-year period of the statute of limitations so that you are prepared against any IRS problems.
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