The Ultimate Guide: How Long Do You Need to Keep Tax Information?

The Ultimate Guide: How Long Do You Need to Keep Tax Information?

Tax filing season can be a stressful time, with many questions inevitably arising. One such question is, how long should you keep your tax information? Do you need to keep everything for perpetuity or can you throw it away after a certain amount of time? The truth is, many factors come into play when determining how long you should keep your tax information, and in this ultimate guide, we’ll dive deep into this topic.

Introduction

Firstly, it’s essential to understand why it’s imperative to keep your tax information. It provides a record of your financial activity, and the IRS may request to see it if needed. Keeping proper records also helps you during a tax audit, should you ever have one.

Now let’s get into the nitty-gritty of how long you need to keep your tax information.

General Guidelines

The IRS recommends that you keep your tax records for at least three years after filing your return. But why three years? This is because the IRS has three years from the due date to audit your return.

There are some exceptions to this rule, such as if you claim a loss from a worthless security or have not filed a return. In these instances, you should keep your tax records for up to seven years.

Business Records

If you are self-employed, a business owner, or an independent contractor, you’ll need to keep your tax records for longer. The IRS recommends that you keep your tax records for up to six years. This helps you in case of an audit or if your business has a dispute about payment.

Investments and Real Estate

When it comes to investments and real estate, the time frame for keeping your tax records can vary depending on several factors. For instance, if you’re claiming depreciation on rental property, you’ll need to keep the tax records for at least three years after selling the property. The same goes for investments; you should keep your tax records for at least three years after selling a security.

Conclusion

In conclusion, how long you need to keep your tax information depends on several factors, including the reason for keeping the records, the type of records, and your personal situation. As a general rule of thumb, keep your tax records for at least three years after filing your return, with some exceptions requiring you to keep them for up to seven years or longer. Properly storing your tax records will help you in case of an audit and will ensure your financial records are in order.

Remember to keep your tax documents well-organized and backed up securely. With this guide, you have everything you need to know about how long to keep your tax documents, so you can file your taxes with confidence.