Editor's Note: This article is part of our 2013 Tax Tips series. Robert Flach is an expert with almost 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
NEW YORK (MainStreet) —You’ve filed your 2012 tax returns, and either paid your taxes or spent your refund. How long should you keep a copy of these returns?
I believe you should keep the paper copy of your federal tax returns (Form 1040 or 1040A plus all Schedules and Forms) forever. This provides a permanent record of your financial history. You never know when the information on a prior year’s return will come in handy for a variety of tax or financial reasons, or just to satisfy personal curiosity.
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The time period for keeping all other tax return records relies on the fact that the IRS, and most state tax agencies, has three years from the due date of a tax return (some states have four years), or filing date if you had any extensions or filed late, to audit and revise that return. If you filed your 2012 Form 1040 by the April 15, 2013 due date, Uncle Sam has until April 15 of 2016 to audit the return and assess additional taxes.
Except in the case of tax fraud - if the IRS auditors can prove tax fraud they can go back forever.
I recommend keeping all of the back-up documentation for a tax return for four full years. This includes all applicable bank statements and cancelled checks as well as W-2s, 1099s, 1098s, worksheets and appropriate receipts and bills. You can toss all such information for your 2012 tax return on April 16, 2017.
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Certain documentation requires longer holding periods.
For investments keep all confirms and appropriate back-up, such as notices of splits and records of any dividend reinvestments, for as long as you hold the investment plus four additional years. If you invested in a partnership or “sub-chapter S” corporation, keep the annual Form K-1 and all paperwork you receive from the investment or business for as long as you own an interest in the entity plus four additional years.
Similarly, if you buy real estate keep all closing or settlement statements for the purchase, refinancing, and sale of the property and documentation of any capital improvements made, for as long as you own the property plus four additional years.
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