One of the most crucial questions that taxpayers have is ‘how? ’The length of time a tax return should be retained depends on the actions, costs, or events recorded in the document. In general, you should keep a tax return record that supports the income, deduction, or credit items that appear until the tax return expires.
Here's a snapshot of the things we have in store for you:
- How many years can you file back taxes and how long should you keep your tax returns?
- How Many Years Can You File Back Taxes - Income Tax Filing Limit Period
- Documents that you must keep for 3 years:
- How Many Years Can You File Back Taxes – If the Records Are Connected to The Property
- How Many Years Can You File Back Taxes – The Period of Limitations According To IRS
- How Many Years Can You File Back Taxes - State Tax Record Retention Requirements
- What Should You Do with Your Old Tax Return After You Know How Many Years Can You File Back Taxes?
- How should you handle all tax-related documents after you know how many years can you file back taxes?
- How Many Years Can You File Back Taxes – Pros and Cons of Maintain Your Tax Records Digitally
How many years can you file back taxes and how long should you keep your tax returns?
The statute of limitations is the period during which the IRS can assess additional taxes or the tax return can be amended to request credit or refund. Here we will discuss the time limit that applies to your income tax return. The term ‘years’ refers to the period after the declaration is submitted and returns submitted before the due date will be treated as if they were submitted on the due date.
You must maintain a copy of the tax return as it will help you prepare your future tax returns and make calculations when filing your revised tax returns.
How Many Years Can You File Back Taxes - Income Tax Filing Limit Period
- You must keep a record for 3 years if you request a credit or refund after submitting your return from the date of your first return or 2 years from when you paid your tax, whichever comes later
- You must keep your tax records for 7 years when claiming loss or bad debt deductions for worthless securities
- You must keep your tax records for 6 years if you do not declare the income to be reported and it exceeds 25% of the total income stated on the tax return
- Keep your records indefinitely unless you submit a return
- If you submit a fraudulent return, then again you must keep a record indefinitely
- Keep your income tax records on the date of tax payment or for at least 4 years after-tax payment
Documents that you must keep for 3 years:
- Statement of Income in a given year
- W-2 forms, 1099 forms, 2439 forms, and K-1 forms
- Evidence of all Expenses
- Sales slips, Invoices, and Receipts
- Canceled checks or other proof of payment
- Annual bank statements
- The tax implications that you face while buying and selling a home
- Closing statements
- Purchases and sales invoices, Proof of payment, and Insurance records
- Mortgage interest deduction forms
- Investments and any documents that prove that you’re earning extra cash from your investment portfolio
- Annual brokerage statements
- Retirement accounts
- Form 5498, Roth, and traditional IRA contributions
- Form 8606, non-deductible IRA contributions
- 401(k) and other company-sponsored plan statements
- Health insurance
- Form 1095-A (Health Insurance Marketplace Statement)
- Form 1095-B (Health Coverage)
- Form 1095-C which shows the Employer-Provided Health Insurance)
- Insurance cards
- The statement that reveals health insurance deductions
- Time limit exceptions
How Many Years Can You File Back Taxes – If The Records Are Connected To The Property
You must maintain the ownership documents of your property until the time limit for the year expires in which you dispose of the property. You should keep these records to determine depreciation, depletion deduction, or amortization, and profits or losses from the sale of an asset.
If you receive property in a tax exemption exchange, the property base will be the same as the base of the abandoned property plus the amount you paid. You must keep records of both old and new properties until the year of ownership of the new property expires.
How Many Years Can You File Back Taxes – The Period Of Limitations According To IRS
According to the IRS, the period during which you can revise your tax return and apply for a tax credit or refund is called the statute of limitations. During this time, the IRS may impose additional tax obligations. Unless otherwise stated, the statute of limitations applies several years after the tax is filed.
- Early tax returns are usually considered to have been filed by the tax deadline around April 15. For 2020, this is July 15th
- The statute of limitations for tax returns submitted at the time of renewal (usually after April 15) is several years from the actual tax filing date
- You must maintain a copy of your tax return indefinitely
- Having access to a copy of your previous tax return will help you prepare future tax returns and make calculations when you need to submit a modified tax return. There is not much reason to delete old tax returns with the help of scanning and cloud storage on your computers
How Many Years Can You File Back Taxes - State Tax Record Retention Requirements
To make your life easier, you must maintain your state tax documents but the rules vary from state to state. So, take a moment to find out how much your state expects you to keep a tax record. State tax authorities may take longer to review a state tax return than the IRS may review a federal tax return.
For example, if you live in Los Angeles, it can take up to 4 years for the California Franchise Tax Commission to review a state's income tax return. During this period, California residents are required to hold tax records for a minimum of 4 years.
What Should You Do With Your Old Tax Return After You Know How Many Years Can You File Back Taxes?
Do not throw old tax returns in the trash as these important documents contain a lot of your personal information such as social security numbers. You don’t want this integral information to be misused. It is integral that you scan all your tax records before you dispose of them safely. You must shred them before you throw them in the trash.
Before you do that, you must check if you need tax documents for other purposes in addition to the actual tax return. You must hold all contracts such as warranty information, insurance policies, mortgages, car loans, medical expenses, and more.
How should you handle all tax-related documents after you know how many years can you file back taxes?
Eliminating unnecessary paperwork has never been easier.
Step 1 - Scanners make a lot of things easy. The advantage of using an effective scanner for maintaining all your records is that they are much faster and easier to use when scanning hundreds or thousands of pages. After you have scanned all your documents, you can simply import them to your computer to make them searchable. This is useful if you need to find old receipts or warranty information. You can also scan directly to the cloud.
Step 2 - Consider software such as Dropbox, OneDrive, QuickBooks Online, Google Drive, Box, Evernote, SharePoint to store scanned copies of different receipts of different sizes and shapes. You no longer have to take care of a pile of receipts and paperwork in your desk drawer, or worse, hide in a place you can't find when you need it. Moreover, in my opinion, if they are checked, your digital files are much easier to find and use to protect yourself than a box full of disorganized receipts.
Step 3 - Paper receipts purchased at gas stations and companies cannot withstand the challenges of time. After years of storing these receipts, they may not have been available if needed for an IRS audit. So for all kinds of investments, tax returns, expenses, etc – you simply need to maintain a soft copy of each rather than stacking piles of paper in places that eventually, you won't be able to remember or maintain.
How Many Years Can You File Back Taxes – Pros And Cons Of Maintain Your Tax Records Digitally
Advantages and disadvantages of digitally storing tax documents
- Holding tax records is no more a headache as people have started maintaining their documents digitally. Besides reducing paperwork, it is also useful to store tax records and receipts online or in the cloud. However, make sure your online store is secure enough so that cybercriminals cannot steal your Social Security number or other data that could be easily stolen
- You can also add a password to protect your files and folders. You must dispose of the paper copy if necessary (after you shred them) unless it is the original certificate, title, evaluation, or original investment document. You must maintain the originals in a safe place
- The IRS also keeps a record of tax returns for the previous year. You can request a transcript online, by phone, or by mail after you submit your proof of identity, like your Social Security number
- Try not to rely on an accountant to keep records. Taxpayers also need to keep a copy of their tax returns and related documents. The tax return is ultimately the responsibility of the taxpayer, and in many cases, the IRS only works directly with the taxpayer during the audit. Thus, it is required to keep tax documents in a file for three years, but it is ultimately the taxpayer's responsibility to ensure that tax returns and documents are available when the IRS requires them
- Taxpayers should consider the copy they keep as a backup. Keeping your records will prevent potential problems if you sell, retire, lose records, or accidentally meet an emergency. In most cases, documents scanned in the storage system are as good as the original documents, sometimes better because the ink doesn't fade. Certificates, stocks, titles, valuations other investment certificates are exceptions to the scan rules as they should be maintained in the original form
Sticking to old tax records can save you time and energy if you need to file an audit or amended tax return. Past tax returns can also help you record your income when applying for a loan such as a mortgage. The above details can help you understand how many years you can file back taxes and how to organize your records in case you need them later.
- You must keep all tax records for at least 3 years from the date of filing your tax return or 2 years from the date of your tax return, whichever is later
- If you have paid early, keep your records for at least two years from the date of tax payment
- The IRS typically reviews the statement within three years of submitting it, but it can take up to six years in the event of a serious error
- If you suspect tax evasion or have not filed a tax return, there is no time limit to maintain taxes – they should be with you for an indefinite period
- You can contact state regulations regarding the length of time a state tax record is retained