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Taxing Matters

By William Perez, About.com Guide to Taxes

Clients often ask me when they can throw away old tax returns, bank statements and other records. The general answer I give is to keep all tax returns and the documents related to the return for at least four years. But Jeremy Vohwinkle, About.com's Guide to Financial Planning, disagrees. One of his record keeping tips is to keep tax returns indefinitely. He makes a good point, "The IRS destroys original tax returns after three years, and you or your heirs may need information from the returns at some point."

So where did I get my four year idea from? The IRS generally has three years from the date you filed a return to initiate an audit. Some states have a longer period of time, for example California has four years to audit a taxpayer. But I have seen instances where the IRS or a state tax agency requests a tax return from a much earlier year, often when the agency has never received an original return. And older documents have a way of being purged after three or four years, and so digging up older documents is often an arduous process. As a result, I'm now inclined to agree with Vohwinkle about keeping documents for a longer period of time.

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February 22, 2010 at 9:46 pm
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