How long do tax returns need to be kept
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If a tax return had an amount due to the Internal Revenue Service when filed, then the general rule is you must keep the records for three years--that is, as long as none of the other criteria listed below applies. Along with the tax return, keep the associated records and substantiation for the amounts recorded on the return. When filing an amended return, to make a claim for a refund, the requirement remains three years from the time the original filing date of the return, or two years after you paid the tax. The requirement is also three years for an originally filed return with a claim for a refund.
Keep employment tax records for a minimum or four years after the employment tax is due or paid. When room allows for the retention of records, keeping these records past four years allows the employer to retrieve records to analyze past salaries for budgeting and planning purposes.
Keep any records for six years if you fail to report income on your tax return that is greater than 25 percent of the total. A variety of issues could trigger this; some are fraudulent, and some
are not. It is always important to be sure all the information you record on a tax return is true and correct.
Amending a return for worthless stock or bad debt requires you to keep the records for seven years from the filing date. Keep all records from the date of original purchase of the stock as well, until after the seven-year period for the return.
Any fraudulent or failing-to-file activity related to a tax return requires the taxpayer to keep these records indefinitely. The intent of this requirement is to prevent the destruction of documents after fraud is found. In addition, keep the records of any assets owned until the asset has been disposed of. This will enable the taxpayer to determine any gain or loss that may arise from the disposal.
Other Reasons to Retain Records
There are many reasons that may arise that require the retention of records beyond Internal Revenue Service requirements. Applying for a home loan or insurance may require you to produce documents from a period longer than those listed. It is wise to review all documents prior to their disposal for possible other uses. Retain them if you are unclear of their potential use.Source: ehow.com