Tax - How Long You Have to to Keep Your Tax Records

Such record keeping depends on the "period of limitations" set by the IRS.

It is defined as the period of time during which the following actions can be taken:

- taxpayer can amend the tax return to claim a credit or deduction,

- taxpayer can amend the tax return to request a refund,

OR

- the IRS can assess additional tax.

If you have filed your returns on time, then usually you have to keep the records for up to three years after the filing of each tax return.

This is because, you are allowed to file an amended tax return Form 1040X for claiming eligible benefits, credits and deductions which you could not claim or forgot to claim at the time of filing the original return, subject to the following time limits:

- within 3 years from the date of your original return,

OR

- within 2 years from the date you paid the tax,

whichever is later.

That is, if you did file your return on time and that was accepted by the taxman without any objection.

Otherwise, the period of limitation during which you have to keep your records varies.

No Period of Limitations

There are two situations where there are no limits to the periods of limitation and thus to the tax payer's liability, which means you have to keep records until there are no more tax liabilities.

1. If you did not file a return

2 . If you file a fraudulent return

That means you are liable until you pay up the tax owed and you may have to keep the records too until such time.

Specified Period of Limitations

If you did file a tax return, then there are specified time limits :

1. If you file a claim for credit or refund after you file your original return - the later of 3 years or 2 years after the tax was paid.

2. If you owe additional tax - 3 years

3. If there is unreported income and it is more than 25% of the gross income shown on your original return - 6 years

4. If you wrote off capital loss from worthless securities in your return - 7 years

In these cases, the stated numbers of years begin the day after the filing of the tax return.

Returns filed before the due date are deemed to have been filed on the due date.

Remember, during these periods of limitations,

- you can make claims you are eligible for

OR

- IRS can demand the money you owe with additional penalties, if any.

UNLESS, of course, you didn't file a return at all when you should have or you filed a fraudulent tax return. Again, for these latter two situations you are liable WITH NO LIMITS ON TIME.

PLEASE NOTE: The statute of limitations discussed above applies to your dealings with IRS only. Longer record keeping periods may be needed to comply with business, personal and property laws. That is beyond the scope of this article.

Please consult the resources provided by the Internal Revenue Service (IRS) for the latest and definitive information.