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Keep your tax information for a minimum of three years. This is the time frame in which the IRS can conduct an audit of your yearly filing. A statute of limitations limits the amount of time the IRS can act against a taxpayer for possible wrongdoing; this is set by the federal government. The IRS can still audit a year even if there is no tax filing and will use the information from surrounding years or base calculations instead. Electronic copies can be stored longer if you think there may be a need.
Once the statute of limitations has passed, the IRS must have reasonable proof to open an audit under special circumstances. Audits after three years must show proof of fraud, theft or conspiracy to commit a crime over multiple years. The IRS also can open an audit after this time limit has expired if there is proof that you concealed information that would affect tax filings past the three-year limitations.
Keeping all your income tax information for three years allows you to provide proof and answers to any IRS questions should they arise. Without this information, the IRS will use surrounding years to create a best estimate and work without your information. This frequently is
not to the taxpayer's benefit, because the IRS will use base calculations that do not take any special rules or situations into account, such as deductions or exemptions that you may have been eligible for.
Keeping your income tax information requires proper record keeping to help you retrieve the information quickly. You need to be able to find the right form for the right year or you will risk further delays, questions and documentation from the IRS. Maintaining records includes storage of income tax papers. Place your information in a secure, and protected, spot that is not prone to damage, such as a safe, fire-proof lockbox or with your accountant. Make copies and put them in a different location so you always have access to information.
After the three-year window has expired, you can dispose of the paper copies. Create an electronic copy in the event that you may need to reference the information at a later date, but don't keep the information on your personal computer. Scan the information onto a CD or a flash drive for storage. Don't throw away any papers with your personal information on them. Thoroughly shred, and possibly burn, these documents. Your income tax records can be used to commit identity theft if enough information can be pieced together.