How long to keep tax records?

Do you feel that you have more records at your home and office than the National Archive?


The question of how long records need to be kept is one of the top five questions we get asked at our Redlands CPA firm.  Our advice depends on the type of records.  Here are some quick tips:

Our general advice is that most tax records should be maintained as long as your tax return can be audited.  The audit period for a Federal tax return is three years from the due date of the return or date of filing, whichever is later.  Each state has its own statute of limitations period.  For California, the statute of limitations is four years from the due date of the tax return or date of filing, whichever is later.

We have seen situations where the IRS or California Franchise Tax Board have claimed that a long past year tax return has not been filed.  Our recommendation is to keep all your past tax returns.  We also recommend that you keep escrow closing statements for the purchase of any real estate or stock purchase or brokerage statements for investments you currently hold to support the cost basis for those assets.

So you’ve identified records that you still need and you want to trim down the space even more?  Why not scan your documents?  IRS and state tax authorities will accept printouts of scanned documents so maintaining the paper copies is not required. Our CPA firm scans documents and part of the tax preparation process and provide the scanned copy to clients upon their request. Scanned documents can be saved on your computer or burned on a CD for easy storage.

Some of your tax records have confidential information such as social security numbers or bank account information. To maintain the security and privacy of that information do not throw those documents in the trash.It’s our strong advice to get an inexpensive shredder or hire a service to shred documents if they are no longer needed.

Here’s a link with more good information on record retention.

I hope that some of these ideas will free up space in your house, make it easier to retrieve your records when you need them and make your Life Less Taxing!