Keeping tax documents...how long?

[JoeP]

I have a stack of tax documents going back to 1990 and further, and it measures about a 16 inches high. My CPA told me to keep the past 6 years, but I would like to check this group's opinion as well, especially concerning the definition of "keep."

Is there ever a need to keep the actual/physical/original tax forms that one receives from banks, employers, investment firms, etc? I would think that I was ever audited or had to produce figures from previous years, a copy would suffice. Whether that copy came from a physical paper that was duplicated on a photocopier, or from a PDF that was printed, it would matter little.

Having said that, my plan is to scan and create PDFs of ALL my tax hardcopy (forms, 1040, state, etc) going back to about 1998. The PDFs would go onto a thumb drive and also a DVD, and put into a safe. Then shred all but the past couple years. If anyone needs the information, it is already in a format that works well with email (it would just need to be encrypted). While we're not hurting for space, I like the idea of reducing the amount of unnecessary clutter.

What is your policy?

[kork13]

Digital archives are cheap & easy to maintain. Hardcopy records are, IMO, meaningless clutter. Keep digital records of your 1040, 1099's, and relevant documents (like charity, medical, moving receipts), then shred everything else. I typically hear that you want to maintain 7 years of tax records. But again, digital archives are cheap & easy. I have records of all my taxes since I went to college.

[JulieAlbright]

I've always meant to get all our older records converted to digital storage but I haven't done all the work yet. I have a file cabinet down in our basement of all our stuff from the 1990's - Mostly because going down there and sorting through it all is never a job that anybody takes on.

Starting around 2001 or so all our records are digital.

I keep a PDF of the file on my computer and I also keep a copy of whatever software we used to do our taxes in my safe. About once every 3 to 4 months I back-up all our home computer hard drives to a high capacity USB stick and then I keep that in a fire proof safe at my sister's house - she keeps hers here at my house. Then I also have a copy backed up to a cloud server.

[doingitallwrong]

These are the IRS guidelines, based on the amount of time during which you can file an amendment and/or they can assess additional tax:

1. You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
2. You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years.
3. You file a fraudulent return; keep records indefinitely.
4. You do not file a return; keep records indefinitely.
5. You file a claim for credit or refund* after you file 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.
6. You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.

The number of years to keep records means years after the filing deadline for that return (usually April 15); even if you filed it on February 1, for retention/amendment/assessment purposes it's considered filed on April 15.

The IRS does actually have requirements for electronic records, Rev. Proc. 97-22 (starts on page 9 of this document):

http://www.irs.gov/pub/irs-irbs/irb97-13.pdf

[rennigade]

Step 1: Scan them
Step 2: Store them electronically in multiple places in case of catastrophic failure
Step 3: Burn physical paper document
Step 4: Keep electronic copies until end of time

[bjl584]

A friend of mine who works for the IRS told me that they can go back 10 years for audits and etc.

[JoeP]

The IRS does actually have requirements for electronic records, Rev. Proc. 97-22 (starts on page 9 of this document):

http://www.irs.gov/pub/irs-irbs/irb97-13.pdf

Thank you for that link. Section 7 (page 11) allows for the destruction of the original hardcopies, provided the data is backed up to a compliant electronic system, and that the system continues to comply.

So yes, destruction of the paper documents is absolutely allowed. It makes good sense to ensure that your electronic backups are somehow preserved in such a way that they are accessible for a very long time. This includes multiple storage technologies as well multiple locations.

[GrimJack]

A friend of mine who works for the IRS told me that they can go back 10 years for audits and etc.

This is true but tricky - 10 years from the 15th of April following the tax year unless you get a notice about the tax year in question - the clock is reset to the notice date. There are things that reset the clock, many that I don't know about and some that I can't talk about but sure, 10 years is a good working figure. Oh, I think that the 7 year retention period is about right but if you have older records, the IRS can ask for them so technically if you keep your records forever the IRS might be able to get them.

Oh, and the statute of limitations on refunds is 3 years from April 15th of the following year except that Injured Spouse claims have no s.o.l. and amended returns reset the 3 year clock also.

[Kundan Lal Rana]

I would recommend to keep those document for at least 4 years. Ideally, scan those documents and upload to your Google drive, Dropbox or whatever cloud storage your are using.

Hope that helps,

[sv2007]

3 years for IRS, forever for fraud.