Follow Chad Linkedin
Email Chad Email
Financial
Aug 1, 2017

Guidelines For Tax Records Retention

Sponsored Content provided by Chad Wouters - Partner, Earney & Company, LLP

A frequently asked question we get from clients is, “How long do I need to hold onto my tax returns and supporting documents?”

The answer is very similar to most in the accounting world - “It depends.”

You should keep your tax returns and other documents that support an item of income, deduction or credit shown on your tax returns until the period of limitations for those tax returns runs out. The period of limitations is a period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax.

Generally, the IRS has at least three years to question items on returns and bill for any additional tax.

Other than copies of your tax returns, you should also make sure that you have records that list: income (wages, interest/dividends); exemptions (cost of support); medical expenses; tax; interest; charitable contributions; mutual funds; stocks; childcare; business expenses; professional and union dues; uniforms and job supplies; education (if deductible for income taxes); automobile (business/charity); and travel expenses.

If you have any hesitation about the validity of your tax returns, it may be best to hold on to your returns and records for up to six years. The IRS can go back that far if a return omits more than 25 percent of income.

If you file a claim for a loss from worthless securities or bad debt deduction, you will want to keep records for seven years.

You will want to keep your records indefinitely in one of two cases: if you fail to file your returns; or if you file a fraudulent return. If fraud is proven, there is no limit as to how far the IRS can go back.

Once the period of limitations runs out, before you throw away your tax returns and records, you should review your documents to see if you might need them in the future.

One important question you will want to ask yourself is, “Are the records connected to property?” Hold on to any records that help to establish the adjusted basis of real estate. For old and new property, keep records that relate to property until the period of limitations expires for the year in which you dispose of the property. This also pertains to property that you either inherited or received as a gift.

If you have to file a business return, you will need to keep employment tax records, such as payroll tax returns, wage amounts, copies of all W-4 forms, and amounts and dates of tax deposits for a minimum of four years after the date the tax becomes due or is paid, whichever is later.

It is also important that you retain copies of worker health coverage forms for at least three years after the deadline for filing these documents. Records on cost of assets, depreciation, etc. should be retained for decades.

Although there is a trend of three- to four-year retention rates, know that these are only the IRS standards. Retention rates can also vary by state. Insurance companies or creditors may require you to keep records longer than the IRS does, so make sure you read your documents and check with the appropriate authorities before shredding important records.

Chad Wouters, CPA joined Earney & Company in December 2006 and became the tax partner in November 2013. With an emphasis on strategy and planning, Chad works with his clients all year to ensure the most efficient tax strategies are put into place.  Earney & Company, L.L.P.  is a CPA firm that handles tax compliance, consulting and planning as well as audit and other assurance services.  For more information please visit www.earneynet.com or call (910) 256-9995.  Chad can also be reached at [email protected].
 

 

Ecolarge
Ico insights

INSIGHTS

SPONSORS' CONTENT
Untitleddesign12 101824110415

Tips When Updating Your Business’s Burglar Alarm System

Luke Wheeler - Holmes Security
Untitleddesign12 101424113223

Carpe Diem

John Monahan - Vistage
Cfss headshots parker robert webversion 21422121214

Duke Energy Will Pay You Up to $9,000 to Go Solar with a Battery

Robert Parker - Cape Fear Solar Systems

Trending News

Endowment Grants $1.6M To New Hanover County Amid County Budget Cut Talks

Cece Nunn - Jun 12, 2025

New Hanover County Officials Considering Job Cuts

Cece Nunn - Jun 12, 2025

New Hanover County Adopts 30.6-cent Tax Rate, Eliminates Nearly 100 Jobs

Cece Nunn - Jun 13, 2025

Leland Continues Work On Plan To Attract Jobs

Staff Reports - Jun 13, 2025

Offers Due This Week For City-owned Downtown Land Next To Skyline Center

Emma Dill - Jun 11, 2025

In The Current Issue

Bespoke Unveils Bar Addition

By leaning into the overall vibe of Italian apertivo drinking culture, Bespoke’s owner, Robby Dow, has developed a new business model for th...


Live Oak Sets Small Loan Goal

"Live Oak Bank has taken several steps to build out our (Live Oak Express) team, and, to gain efficiency, has created rules and responsibili...


Center Offers Experiential Education

Since 2009, Zac and Celine Adair have worked to provide opportunities that go beyond the traditional classroom to foster personal growth and...

Book On Business

The 2024 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2024 Power Breakfast: The Next Season