Fall is a great time to go through old belongings, throw out and donate what you don’t need and organize what you want to keep.
Fall cleaning often means throwing out a bunch of useless papers and junk. However, it’s a good idea to be careful of throwing away old tax returns.The general rule of thumb is to keep previous year tax returns for three years, although depending on your situation, you may need to keep old tax returns for a longer period of time.
The Three Year Rule
You should keep tax returns for three years from the date you filed or three years from the due date. The reason is linked to the IRS statute of limitations. The IRS has the right to review (audit) all tax returns for three years. Not only that, they also have the right to request supporting documents for your income and deductions reported. That means, you should also keep any supporting documents for three years.
Keep for Longer Than Three Years
There are specific circumstances in which the three year rule does not apply. You should keep tax returns for more than three years in the following situations:
- If you omit more than 25% of your gross income on your tax returns, you should keep the return for six years. In that case, the IRS has six years to assess additional tax.
- If you claimed loss for worthless securities or bad debt deductions, you should be save the tax return for seven years.
- If you amortize, depreciate, buy or sell property keep these records until the statute of limitations expires.
- Some insurance companies or creditors may require you keep your records for a longer amount of time.
- It should be obvious that in the case of fraud or failure to file, there is no statute of limitations.
How Long To Save State
If you paid state income taxes, you may need to keep the records for longer than three years, depending on the state. The following states statutes of limitations that differ from the IRS include:
Arizona, California, Colorado Kentucky, Michigan, Ohio, Wisconsin: Four Year Audit Period
Louisiana and New Mexico: Three years after December 31 of the year the tax is due.
Minnesota: Five Years
Tennessee: Three and half years if you filed a claim for refund. Five years if the IRS changed your federal return.
How Do I get a copy of an old tax return?
If you are sure you filed for a previous year and can’t find the return, don’t worry. The IRS has available, for up to seven years, all W-2 forms and attachments from your tax returns. In the situation that you will need to get these, you‘ll have to pay a fee and file form 4506.
In the case that you thought you had a prior year tax return but realized you actually didn’t file, you can file late with PriorTax. After filing your late taxes, remember you will keep your tax return three years from the date you file rather than three years from that tax year.
For those that have old tax returns on file, don’t be in a rush to shred them. While fall cleaning, organize and file away tax returns. In the case that you can throw them away, always be cautious of where you’re throwing documents with your personal information!
Photo via Jennie Faber on Flickr
This entry was posted on Monday, November 11th, 2013 at 7:38 pm and is filed under Late Taxes. Tax Tips. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response. or trackback from your own site.
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