Basic records are documents that everybody should keep. Although the Internal Revenue Service 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.

Basic records

FOR items concerning your ...	KEEP as basic records ...
Income	Form(s) W-2 Form(s) 1099 Bank statements Brokerage statements Form(s) K-1
Expenses	Sales slips Invoices Receipts Canceled checks or other proof of payment
Home	Closing statements Purchase and sales invoices Proof of payment Insurance records Form 2119 (if you sold a home before 1998)
Investments	Brokerage statements Mutual fund statements Form(s) 1099 Form(s) 2439

How long you should hang on to

IF you ...	THEN the period is ...
1. Owe additional tax and situations 2, 3 and 4 (below) do not apply to you	3 years
2. Do not report income that you should and it is more than 25 percent of the gross income shown on your return	6 years
3. File a fraudulent return	No limit
4. Do not file a return	No limit
5. File a claim for credit or refund after you filed your return	Later of 3 years or 2 years after tax was paid
6. File a claim for a loss from worthless securities	7 years

Also keep in mind that while the basic IRS review period is three 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 percent or more, they can come asking questions up to six years later. Add another 12 months for queries about that bad investment.

More details on tax record keeping are available in IRS Publication 552, Recordkeeping for Individuals.

Freelance writer Kay Bell writes Bankrate's tax stories from her home in Austin,
Texas, and blogs on tax topics at Don't Mess with Taxes.

-- Updated: Dec. 26, 2006