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Tax Records: How Long to Keep Documents

By Howard C. Stross
January 13, 2015

This month is the calm before the tax season storm. Starting in mid-January, tax records such as your W-2 and 1099 should start arriving in your mailbox. Store these records in a safe place until you can schedule an appointment to meet with your accountant.

While you are gathering all of your other tax information, you may wonder just how long you need to keep these records. You may be tempted to shred your entire file cabinet as part of your spring cleaning. You may want to throw away all of your 2014 bank statements and just keep the year end statement. You may have heard the IRS has 3 years to audit your return so you may think that you only need to keep your tax return and supporting records 3 years.

The three-year rule is correct for a civil action by the IRS, but that is only correct if the taxpayer can show the tax return was filed with the IRS. That is why some advisors, including the attorneys at Stross Law Firm, recommend permanently retaining a copy of all tax returns and correspondence from and to the IRS and any other governmental taxing authority, such as the Florida Department of Revenue. The 3 year time begins to run on the date you properly file your tax return with the IRS.

If the thought of keeping so many records sounds like you need a storage shed, the IRS allows an electronic or digital copy as a substitute for the paper original of a document or a paper copy if the taxpayer complies with Revenue Procedure 97-22. A scanned receipt is acceptable if the digital copy is identical to the information in the original receipt. To make use of this rule, scanned copies must be organized so a receipt is readily available in case your tax return is the subject of an IRS audit. You must be able to index, store, preserve, retrieve and reproduce your records. You must be able to easily produce a hard copy if requested by the IRS. The burden to produce documentation is on you, the taxpayer, not the IRS. That should be enough incentive for you to regularly scan all of your paper documents and always maintain on-site and off-site backups of all your digital tax records. Today an external hard-drive, flash memory card and off-site digital backups over the internet are inexpensive and easy to do. You just have to do it.

Stross Law Firm is grateful to and would like to thank the certified public accountants at Carr, Riggs, and Ingram who provided us with a handy Record Retention Schedule. We are publishing it with their permission. Click here to find out How Long to Keep Records.

This post is only for your general information. For specific advice and recommendations, discuss the particulars of your situation with your attorney or accountant or contact us for a free 30 minute consultation.

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