With the end of every tax season comes an addition to a growing pile of financial records—bills, receipts and other miscellaneous tax documents—and many taxpayers find themselves looking at a much needed post-tax spring cleaning. This article will help you determine which tax and financial records should be kept and how long you should keep them, and which ones have run their course.
Most taxpayers are advised to keep tax records for a minimum of 3 years following the date of filing or due date for your tax return; this is known as the statute of limitations, a period of time in which tax returns can either be amended for additional credit or assessed by the IRS for additional taxes . This time frame may vary in certain situations, such as:
Copies of past tax returns should always be kept, as they help with preparing future tax returns and are useful if filing an amended tax return.
Much like individual tax records, the statute of limitations for business tax records is dependent on the nature of the business and the records in question. The IRS suggests that employment tax records be kept a minimum of 4 years after the tax is due or paid (whichever is later). These records include:
(for more information on employment tax record-keeping, please visit irs.gov).
Sales tax returns, the statute of limitations varies by state; if you are unsure of how long your business’ sales tax records must be kept, consult your local tax adviser.
While the IRS may only require tax or financial documents to be kept for the respective statute of limitations, it is always useful to determine if insurance companies or creditors still require documents that would otherwise be eligible for disposal. If you are unsure of how long a certain tax or financial document should be kept, a tax attorney or accountant can assist you in ensuring you are maintaining your records for the necessary length of time.
by Zulay Regalado on June 9, 2014 in Blog, Tax Audits