Advertisement

How long should filed income tax returns be kept?

Good for you. You filed your income taxes on time. Now, what do you do with the mountain of paperwork that piles up even if you filed electronically? What should you keep? What can you toss?

The law does not require you to keep any specific records. But if the Internal Revenue Service has questions about your return, you want to be able to prove what you reported. The answer for individual taxpayers to, "Should I keep or toss this?" depends on the purpose the documents serve. Rules are different for business returns, not addressed here.

Advertisement

Whether you keep your records on paper or in electronic storage, you should retain copies of your federal and state tax returns. You will need them if you have to file an amended return or if you are audited. Not much fun to think about, but copies of your return can be helpful to your survivors or the administrator of your estate in event of your death.

The IRS suggests you also retain:

•All receipts, canceled checks and any other records that support your claim to a charitable donation. If you sent a check to a local nonprofit that qualifies for a charitable gift deduction and received a note thanking you for your generous donation, save the note if you deduct the donation in your charitable contributions for the year.

•Lists of items you donated to charity, such as clothing or household goods. These donations are generally valued at fair market value, which the IRS defines as "the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts."

The good news: you don't have to keep income tax-related records indefinitely. The IRS says generally you must keep records, "as long as they may be needed for the administration of any provision of the Internal Revenue code."

The period of limitations on income tax returns is generally three years after the return was filed. If you filed your return in February 2017, do not discard it until after April 18, 2020 — the three-year period begins on the date returns are due. If you file a claim for a refund or credit after you filed your return, retain the records for three years after you file the claim.

Specific situations require you to keep income tax records longer than three years. If you did not report income that you should have reported, and the omitted income is more than 25 percent of the gross income you entered on your return, you should retain the documents for six years.

If you filed a claim for losses from a bad debt or worthless securities, keep the records for seven years. If you filed a fraudulent return or failed to file a return, the IRS suggests you keep records indefinitely.

For state taxes, Comptroller Peter Franchot recommends keeping records at least three years after the filing deadline.

Donna Engle is a retired Westminster attorney. Reach her with questions or feedback at 410-840-2354 or denglelaw@gmail.com. Her column, which provides legal information but not legal advice, appears on the second and fourth Sunday each month in Life & Times.

Advertisement
Advertisement