“How long should I keep this?” is a question we hear all the time from our clients and is not always easy to answer. As a general rule, records should be preserved only as long as they serve a useful purpose or until all legal requirements are met. Generally, you are required to keep records that will enable the IRS to determine your correct tax. Usually the federal statute of limitations runs out three years after a tax return is due or filed, whichever is later. However, the statute runs for six years if there is an omission from gross income of 25% or more.
In the case of fraud or failure to file, there is no time limit. Each state can determine its own statute of limitations. To keep files manageable, it is a good idea to develop and use a schedule so that at the end of a specified retention period, certain records are destroyed.
We offer this schedule as a starting point.