How Long Should Tax Returns Be Saved?

Most Americans save tax returns for three years, but sometimes they should be kept longer

How Long Should Tax Returns Be Saved?
July 11, 2016

Most individuals in the U.S. know to keep their tax returns for three years in case the IRS decides to audit them, but few know that there are exceptions to that rule. Some people throw away the oldest kept tax return when they file their new annual one, which is normally okay. However, there are some situations in which taxpayers will want to keep records going back more than three years:

Taxpayers who have under-reported their annual income by a significant amount (25 percent or more) will need to keep their returns for at least six years - the IRS has that long to investigate and file a claim for back taxes.

Those who have never filed a tax return will want to keep all their tax documents as long as they can. There is no statute of limitations on tax fraud, meaning the IRS can prosecute at any time, so if you think that is a possibility, you should never throw out your documents.

The same goes for fraudulent returns. The IRS can investigate, audit, and prosecute these years later. This no-limit rule also applies to those who did not intentionally file fraudulent reports. Taxpayers who made errors on their return are subject to the same rules, and without documents to back up their claim, may face steep fines. If the mistake was accidental and was not caught, it can be hard to know when to keep returns for years and when not to.

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