How Long Should Tax Related Documents Be Retained?

Maicher CPA Pllc provides a full range of tax services to businesses and individuals.
Proper document retention is essential for accurately claiming deductions and for effectively
proving income and expenses in the case of an audit. Taxpayers have the burden of proof.
Below is a non-exclusive summary of some key timelines for document retention under IRS
rules.

According to the IRS, the length of time a document should be kept depends on the
action, expense, or event in question. Generally, “documents” supporting income, deductions or
credits on a tax return should be retained until the “limitations period” for that return expires.
“Documents” can include, among other things: receipts, invoices, canceled checks, ledgers,
mileage logs, account statements and legal documents. The “limitations period” is the time
period where the IRS can review, analyze, and resolve a tax issue.

The period of limitations applicable to income tax returns are as follows:

• (1) Keep records for 3 years if situations (4), (5), and (6) below do not apply.
• (2) Keep records for 3 years from the filing date of your original return or 2 years from
  the date the tax is paid, whichever is later, if a claim for credit or refund is made after
  filing.
• (3) Keep records for 7 years if you file a claim for a loss from worthless securities or bad
  debt deduction.
• (4) Keep records for 6 years if you do not report income that you should report, and it is
  more than 25% of the gross income shown on your return.
• (5) Keep records indefinitely if you do not file a return.
• (6) Keep records indefinitely if you file a fraudulent return.

Additionally, keep employment tax records for at least 4 years after the date that the tax
becomes due or is paid, whichever is later. Last but not least, always keep copies of filed tax
returns. They help in preparing future tax returns and making computations if you file an
amended return. The IRS may not retain returns indefinitely.

The Minnesota Department of Revenue has similar, though somewhat different document
retention rules, relative to the IRS rules. Maicher can advise you in this regard.

Take-away: Retaining documents for the correct period is important. Call Maicher if
you have any questions concerning the same.

Sources:
IRS Pub. – “How Long Should I Keep Records?” (July 5, 2023).
IRS Pub. – “Statutes of Limitations for Assessing, Collecting and Refunding Tax.” (June 20, 2023).IRS Pub. – Topic No. 305, “Recordkeeping.” (June 15, 2023).