Well…it depends. The safe and most conservative answer is 7 years as long as you filed a valid return. However, you will see from the table below that it may be a shorter retention requirement.
|THEN the period is…
|1. Owe additional tax and situations (2), (3), and (4), below, do not apply to you
|2. Do not report income that you should report and it is more than 25% of the gross income shown on the return
|3. File a fraudulent return
|4. Do not file a return
|5. File a claim for credit or refund after you filed your return
|Later of: 3 years or 2 years
after tax was paid
|6. File a claim for a loss from worthless securities or a bad debt deduction
Employment tax records: keep for at least 4 years after the tax is due or paid, whichever is later
Assets: keep records until the period of limitations expires for the year in which you dispose of the property.
Keep in mind though, that other organizations, such as your insurance company or creditors may require you to keep your records longer than the IRS does.
Yes, if you do it the right way! You are not required to keep original hard copies of your records. You can store your books and records electronically, as long as they provide a complete and accurate record of your data. You need to be able to retrieve and reproduce the soft copies in legible format. Therefore, you must make sure that you have a method of storing the data such that it is easily searchable and compartmentalized into the applicable tax year.
We have set this up for many of our clients, let us know if you’d like our help to get you closer to being paperless!