Retaining Records for Taxes

Generally, you must keep your records until the IRS period of limitations runs out. The period of limitations is the time which you can amend your tax return to claim a credit or refund, or the IRS can charge additional tax. There are seven requirements from the IRS regarding your period of limitations:

  1. If you owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
  2. If you did 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. If you filed a fraudulent return; keep records indefinitely.
  4. If you do not file a return; keep records indefinitely.
  5. If 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. If you file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.
  7. Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

Note: Keep your filed tax returns. They will aid in preparing subsequent returns and computations if you file an amended return.

Records pertaining to fixed assets

Records must be kept for fixed assets until the period of limitations expires for the year in which you dispose the property through a taxable disposition. It is important to keep these records for any depreciation/amortization calculations, and to identify the gain/loss on the disposition of that property.

If your disposition was a nontaxable exchange, then your basis for that property is the same as the property that was given, increased by what you paid for it. Keep the records until the period of limitations expire from the date you disposed of the property (see above).

Records pertaining to nontax purposes

Though many records do not have tax implications, do not discard them until you check their use for other purposes. For example, your creditors, auditors, or insurance company might require you to hold them longer than the IRS does.

For more information see:
http://www.irs.gov/businesses/small/article/0,,id=98513,00.html

Baker and Company, PC is a Certified Public Accounting firm located near downtown Dallas. Ford Baker has been a CPA serving the DFW Metroplex, Plano, Collin County and all of North Texas for 19 years. The firm has grown to 7 professionals who stand ready to assist small business and individuals on taxation issues, tax preparation, small business accounting using QuickBooks, PeachTree and a variety other solutions and/or assistance with financial statement preparation and reporting to lenders. For more information about this change in the tax law or what we can do to help you, please feel free to contact our office at 214.827.9118 and schedule a time we can meet.

IRS CIRCULAR 230 REQUIRED NOTICE
IRS Regulations require that we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended to be used and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or for the purpose of promoting, marketing or recommending to another party any transaction or tax-related matter.