When is it Safe to Shred Tax Records?

By George Wong, CPA

Have you ever asked yourself: “When can I delete old bookkeeping files and tax files on my computer?” or “Why can’t I get rid of these old tax records that are cluttering up my house?” These are good questions! In this article, I will discuss when it is and when it is not appropriate to shred or erase (if kept on your computer) your tax records and files according to the Internal Revenue Service (IRS) guidelines.

As you may already know, the main purpose of keeping your prior year tax records is to have documentation if the IRS audits your tax return. Having tax receipts is your main defense in proving your deductions during audit.

Generally, a three year statute of limitations exists after the original date the return is filed or due, whichever is later, for all returns. Basically, the IRS can audit your tax returns filed three years ago. Therefore, you should generally keep your tax records for at least three years.

In special circumstances, the IRS may go back 6 years if the taxpayer omits from gross income an amount in excess of 25% of the amount of gross income reported on the originally filed tax return. This statute of limitations begins from the date the original tax return was filed. In an extreme case where either the taxpayer filed a false or fraudulent tax return, the taxpayer is willfully attempting to evade taxes, or the taxpayer does not file a tax return, the IRS may assess taxes. In addition, if a fraudulent tax return was filed, the IRS can impose additional taxes at any time, without regard to statutes of limitations, although the burden of proof falls on the government to prove fraud by the taxpayer. Hopefully in this case, you kept all of your tax records from the beginning of time.

When in doubt, keep all your tax receipts, records, and tax returns. It is also a good idea to hire a Certified Public Accountant or tax advisor to represent you in an audit by the IRS or state taxing authority. If you have any questions, please contact by email george.wong@bellandcompany.net