Articles Tagged ‘Period of limitations’

How long should you keep your financial records?

Friday, November 26th, 2010


  

If you have ever inquired around about how long to keep your financial records, you have probably gotten a number of different answers.

Per the IRS, you must keep your records as long as they may be
needed for the administration. Generally, this means you must keep records that support an item
of income or deduction on a return until the period of limitations for
that return runs out.

The period of limitations is the period of
time in which you can amend your return to claim a credit or refund, or
the IRS can assess additional tax. The following contains the period of
limitations that apply to income tax returns. Unless otherwise stated,
the years refer to the period after the return was filed. Returns filed
before the due date are treated as filed on the due date.

In the following situations: The period of limitations is:
You owe additional tax and situations (2), (3), and (4), below, do not apply to you. 3 years
You do not report income that you should report, and it is more than 25% of the gross income shown on your return. 6 years
You file a fraudulent income tax return. No limit
You do not file a return. No limit
You file a claim for credit or refund after you file your return by filing Form 1040X. Later of: 3 years, or 2 years after tax was paid
Your claim is due to a bad debt deduction. 7 years
Your claim is due to a loss from worthless securities. 7 years

  
A few other resources that I have enjoyed reading on the length to keep financial records.

Suze Ormon ~ Financial Clutter, What To Keep And What To Get Rid Of
Professional Organizer M. Martone ~ Handy Reference Guide

Brook M. Avey, CPA
President
www.brooksideaccounting.com
888-317-4835

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