Tax documents and digital records can accumulate to a nigh-unmanageable degree over the years. It comes as no surprise that individuals might wonder how long they should keep their tax records.
Those with particularly complex tax situations could find it hard to distinguish which tax documents are necessary and which are no longer relevant. The answer depends on the nature of each taxable transaction in one’s history.
Be aware of the period of limitations
The IRS-recommended timeframe for keeping tax records takes into consideration the amount of time you have to amend a return. This period of limitations can vary for each item in one’s tax history. In general, the IRS suggests keeping all records for at least three years. Some records may continue to be relevant for up to seven years, such as a claim for bad debt deduction.
Other situations to consider
Unique tax situations, such as those arising from online sales, may require different considerations in regard to keeping records. As another exceptional example, tax documents pertaining to property should specifically remain on-hand until the expiration of the period of limitations for the year in which disposal of property takes place.
It is worth noting that important financial documents could bear importance in nontax situations as well. Even after the period of limitations expires for a given tax item, it is best to check that a record is not needed for other circumstances before disposal. Individuals with complex tax situations can consult with a tax lawyer to help understand the implications of keeping or discarding certain records.