Tax Record Retention Guidelines

Clients frequently ask us how long they should retain records relating to their financial and tax matters. Generally, you should retain these records until the statute of limitations with respect to all tax matters relating to the records has expired. The statute of limitations for federal income tax purposes is generally 3 years from the later of the initial due date of the tax return or the date you actually filed your return. The 3 year period is extended to 6 years in some cases. The statute of limitations never expires where you fail to file a return or in circumstances of fraud. The following provides some general guidelines, leaning toward a conservative approach. Please call us if you have questions.

Indefinite

• Copies of business and personal income tax returns.
• Copies of gift, estate, and inheritance tax returns for transfers made by or to you.
• Copies of IRS, state, or local tax audit reports.
• Corporate stock records and minutes.
• LIFO inventory computations and supporting documentation.
• Capital asset purchase records, including dividend reinvestment reports (at least until 6 years after sale).
• Home purchase and improvement cost records.

Six Years

• Bank statements and deposit slips.
• Sales journals and other support for revenues and deposits.
• Documents supporting business expenses and itemized deductions.
• Inventory records.
• Depreciation schedules.
• All other records necessary to support deductions — Remember, in disputes with the IRS, you must prove that you’re entitled to the deduction.

Tip: Many financial service providers now provide electronic statements. You may retain these, rather than the paper copies of the statements. Be sure to back up the files to a CD or DVD on at least an annual basis.

Leigh McKee
lmckee@ddfky.com