Clients often ask, “How long do I need to keep my tax return?” and “How far back can the IRS examine my return?” The answers depends on the date the return was filed, which determines the statute of limitations.
The statute of limitations for the IRS to examine your tax return, make changes or assess any additional tax liabilities is the later of:
a) three years from the due date of the return; or
b) the date the return was actually filed.
For example, if your 2015 return was timely filed on March 31, 2016, the statute of limitations will expire after April 15, 2019. (Technically, in 2016 the filing deadline was on April 17 – make sure to check the actual deadline date for the year in question).
If your 2015 return was filed late, for example November 22, 2016, then the IRS will have until November 22, 2019 to examine, make changes, or assess additional tax liabilities.
If you did not report income that you should have reported, and the unreported amount is more than 25% of the gross income shown on your return, you should keep your records for 6 years, as the statute of limitations is extended in this situation.
Worthless Securities/Bad Debt
Keep records for 7 years if you filed a claim for a loss from worthless securities or bad debt deduction.
Return Not Filed
If you did not file a return, keep records indefinitely. You should probably file the return!
If you filed a fraudulent return, keep records indefinitely. It may sound strange, but this is straight from the IRS website! Also, you should not have filed a fraudulent return!
You Paid Employees
If you have employees, including household employees, keep your employment tax records for at least 4 years after the date that payroll taxes were due or paid, whichever is later.
Claim for Credit or Refund
If you file a claim for credit or refund after you filed your return, keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
Filing an amended return does not extend the statute of limitations for your original return. The original date determines the statute of limitations (some exceptions apply if you file within 60 days of the assessment window).
Keep all supporting records, such as forms W-2, 1099, 1098, brokerage statements, credit card statements used as support, mileage logs, canceled checks, proofs of payment, invoices, bills, charitable deduction receipts, etc. for as long as the statute of limitations for your particular situation runs.
Also, remember to keep proof of minimum essential health insurance coverage or proof that you qualified for an exemption or premium tax credit (especially if you had to pay it back).
And finally… What if you did not file a return, and you think you are due a refund?
For purposes of claiming a refund, you have 3 years from the due date of the return to file. For example, you failed to file your 2014 return, but you would like to do so now because you expect to receive a refund. The 2014 returns were due by April 15, 2015. Therefore, you have until April 15, 2018 to file your 2014 return for purposes of claiming a refund. If you waited until April 15, 2018 to file your 2014 return, the statute of limitations would not expire until after April 15, 2021.
When filing a return that is past due, for any reason, it is always a good idea to engage a professional tax preparer. There may be complex issues involved that can be easily overlooked by the individual taxpayer. We are a Certified Public Accounting Firm based in Texas, but we serve taxpayers in any state.
If you are drowning in a tax problem, call on [Tax Buoy] for help and guidance!
Click on the Firm Website link at the top to be directed to our website.