Maintaining tax filing documentation is critical. It contains the answers to questions the Internal Revenue Service could ask years after you file your return.
Although the IRS doesn’t require you to keep your records in a particular way, it does urge taxpayers to keep them “in an orderly fashion” and in a safe place.
|FOR items concerning your …||KEEP as basic records …|
Canceled checks or other proof of payment
Purchase and sales invoices
Proof of payment
Form 2119 (if you sold a home before 1998)
Mutual fund statements
Form 5498, Roth and traditional IRA contributions
Form 8606, nondeductible IRA contributions
401(k) and other company-sponsored plan statements
Form 1099-R distribution records
|Affordable Care Act coverage||Form 1095-A, Health Insurance Marketplace Statement
Form 1095-B, Health Coverage
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
Form 8965, Health Coverage Exemptions
|IF you …||THEN the period is …|
|File a return and the next 3 situations below do not apply to you||3 years|
|Do not report income that you should and it is more than 25% of the gross income shown on your return||6 years|
|File a fraudulent return||No limit|
|Do not file a return||No limit|
|File a claim for credit or refund after you filed your return||Later of 3 years or 2 years after tax was paid|
|File a claim for a loss from worthless securities||7 years|
These time frames are for the material used to file your tax return. As for the filing itself, you should hang on to the actual Form 1040 and accompanying schedules and forms forever. This typically is not that much material and, if you prefer, you can convert it to a digital format and keep it stored on your computer, saving trees and space.
Also keep in mind that while the basic IRS review period is 3 years, there are exceptions — in the tax collector’s favor.
If the agency suspects you’ve underreported your income or has questions about a worthless stock write-off, look out. When examiners believe you’ve shorted your income amount on a return by 25% or more, they can come asking questions up to 6 years later. Add another 12 months for queries about that bad investment.
Note, too, that if the IRS is convinced you submitted a fraudulent tax return, tax agents can come after you at any time. There is no statute of limitations on bad-faith filings.