Determining how long to keep tax records and what specific income tax records to keep can be a tricky process for corporate records management staff. In general, many accountants and others recommend keeping all tax records, including receipts, W-2 forms, 1099 forms, and any 1040 or other tax filing forms or communications with the IRS for a period of seven years. This is fine and will protect you from any problems, but storing all of this information each year for seven years can be an issue for apartment dwellers or anyone with limited space.
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If you cannot keep all tax records for seven years, there are a few other guidelines that may help. The IRS has specific rules on how long you should keep each separate type of tax record or document. If you owe additional tax, and have paid it, you should keep the income tax record for three years. If you file a fraudulent return or do not file a return at all, you should keep the records indefinitely. If you file a claim for a refund, you should keep your returns and other information for three years. The seven year figure comes from the IRS recommendation that you should keep records from writing off or filing a claim against a bad debt or investment loss for seven years. Keeping everything for seven years means you should be in compliance in any event.
If you don’t have a record, you may be penalized. If you are audited or another question arises as to your tax return and you do not have the records to prove the claims you made on your tax statements, then you may be responsible for back taxes, fees and other costs.
If you have any concerns about specific records, or if you are being audited by the IRS, it is in your best interest to consult an experienced attorney.