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Old 01-12-2021, 06:35 PM   #81
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Originally Posted by ncbill View Post
Once you're past 3 years that's not how it works:

https://www.americanbar.org/groups/b...17/08/06_wood/
Ncbill,

I did not note differences in your link compared the the brief example I gave, or my understanding. Perhaps you can point me to the point you are making.

Thanks.
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Old 01-12-2021, 07:21 PM   #82
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Originally Posted by teejayevans View Post
I thought the IRS can only audit you within 3 years?


Correct. I tried telling them that. Thereís no reason to save anything beyond 3 years unless you love flipping through them for some reason.
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Old 01-12-2021, 07:26 PM   #83
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Originally Posted by ncbill View Post
Once you're past 3 years that's not how it works:

https://www.americanbar.org/groups/b...17/08/06_wood/


It does for anyone who doesnít massively understate income by the limits stated. If I ever made a mistake it would be in the category with a statute of limitations of 3 years. That probably applies to most.
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Old 01-12-2021, 07:41 PM   #84
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Having my tax returns from 1998 saved my butt 2 years ago. I had withdrawn contributions I used to open a roth that year and the IRS called me on it and said I owed about $30K in taxes and penalties on the withdrawal. When I went to my broker they had kept no record of when I opened the roth or for how much, and apparently the IRS didn't either, or else were too lazy to look up my 98 return themselves. Anyway, there in the back of my filing cabinet was a frayed copy of my '98 1040, which suddenly became worth about $30K to me. I quickly sent it in and waited several months to get the letter from the IRS saying I owed nothing. Phew!
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Old 01-12-2021, 08:24 PM   #85
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From 1985 - hard copies
Probably should scan to pdf's, but oversea's tax returns were thick....
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Old 01-12-2021, 08:25 PM   #86
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Originally Posted by Al in Ohio View Post
It does for anyone who doesnít massively understate income by the limits stated. If I ever made a mistake it would be in the category with a statute of limitations of 3 years. That probably applies to most.
The problem is how do you show they are wrong without records?

Same comment if they lost your return and allege you did not file. Statute never runs on an unfiled return.

As I said, not a huge risk for most people but something that does happen.
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Old 01-12-2021, 10:24 PM   #87
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We have hard copies back to 1990. Iíll let my kids dispose of them. Donít trust computer storage or the IRS. Accountant has PDFís from last 4 years
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Do you really only keep 7 years tax returns?
Old 01-13-2021, 02:32 AM   #88
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Do you really only keep 7 years tax returns?

Quote:
Originally Posted by cat4ever View Post
Having my tax returns from 1998 saved my butt 2 years ago. I had withdrawn contributions I used to open a roth that year and the IRS called me on it and said I owed about $30K in taxes and penalties on the withdrawal. When I went to my broker they had kept no record of when I opened the roth or for how much, and apparently the IRS didn't either, or else were too lazy to look up my 98 return themselves. Anyway, there in the back of my filing cabinet was a frayed copy of my '98 1040, which suddenly became worth about $30K to me. I quickly sent it in and waited several months to get the letter from the IRS saying I owed nothing. Phew!

I donít get it, I thought you donít report roth contributions on your taxes unless itís conversion of ira or distributions (8606 form)? So how did 98 taxes help you?
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Old 01-13-2021, 02:49 AM   #89
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Sorry, I should have specified It was a conversion. The principal on conversions can be withdrawn without penalty (or taxes since they've already been paid) after 5 years.
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Old 01-13-2021, 07:26 AM   #90
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Ncbill,

I did not note differences in your link compared the the brief example I gave, or my understanding. Perhaps you can point me to the point you are making.

Thanks.
Past 3 years the IRS needs to provide evidence if they claim you've understated income/overstated basis by more than 25%...they simply can't say you did so & assess penalties...so the burden of proof shifts to them after the 3 year audit period (during that time the burden of proof is on you)

As others have noted, W-2 earners aren't very likely to ever face such a claim.
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Old 01-13-2021, 08:00 AM   #91
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Originally Posted by ncbill View Post
Past 3 years the IRS needs to provide evidence if they claim you've understated income/overstated basis by more than 25%...they simply can't say you did so & assess penalties...so the burden of proof shifts to them after the 3 year audit period (during that time the burden of proof is on you)

As others have noted, W-2 earners aren't very likely to ever face such a claim.
I did not mean to suggest they would do so with no proof. Trouble is you would need proof to refute it. So when someone suggested earlier in the thread that they shredded their tax returns thinking that might be a defense against a substantial understatement or fraud, I just wanted to point out that was not the case.

I also made the point that being assessed in this manner is unusual. But it is not impossible.
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Old 01-13-2021, 08:23 AM   #92
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I recently starting purging old papers and shredded of all our tax returns before 1999 Almost all were the short form such we had nothing but W2 income and relatively little investments. I have returns from 2000 on in softcopy, kept encrypted as they have SS numbers for both us and our kids on them.
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Old Yesterday, 04:30 PM   #93
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I keep all years, forever. Because:

1. There is no statute of limitations if the IRS can prove "fraud."

2. I will need to verify my income year-by-year to confirm Social Security calcs my benefit correctly.

I still have all tax returns going back to my first job in high school.
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Old Yesterday, 04:57 PM   #94
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Take it from someone that has prepared taxes for 20 years and participated in multiple IRS on site and paper audits.. Not having the back up is a big disadvantage. You will sleep better if you save any tax return that has "legacy" implications: i.e Rental Property , IRA conversions , Taxed Trad IRAs, Business property,..Stocks that have moved from one broker to another etc..Estate items, For simple returns with just general W2 income, yes 3 years. Mine go back to 1970. -- I guess my kids will get a kick out of seeing my annual income back then...
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Old Yesterday, 05:39 PM   #95
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Several years ago I was unable to renew my NC driver's license because a NY state resident had an unpaid ticket from the state of Maine in 1985. He had the same name and DOB as me. My fed/state tax return showed that I lived in KY in 1985. That data was helpful in trying to prove a negative. dave
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Old Yesterday, 05:49 PM   #96
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I recently started keeping all tax returns forever but disposing of the back up documents after 7 years with the exception of 1099Rís, 8606 and 5498.

I read this somewhere.

But for the longest time I only kept everything for 3 years.
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Old Yesterday, 06:31 PM   #97
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Originally Posted by Onward View Post
I keep all years, forever. Because:

1. There is no statute of limitations if the IRS can prove "fraud."

2. I will need to verify my income year-by-year to confirm Social Security calcs my benefit correctly.

I still have all tax returns going back to my first job in high school.
1. I don't think that's correct. There is no statute of limitations if you don't file a return. However, if you do file a return, I believe the limit on fraud is 6 or 7 years. Of course, someone could be concerned that the IRS loses track of the fact that one filed a return in the first place. If that's the case, then the only thing I can think would be proof of mailing -- having a copy of a return from 1975 doesn't prove that you sent it into the IRS.

2. You can verify it by checking your data against SS records online each year. If there's a discrepancy, I'd fix it as soon as I found it rather than wait for 20 years or whatever. Of course, I trust the SSA to keep track of my earnings and not lose them; maybe I shouldn't. Maybe I'll print off a copy of my earnings record from them.
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Old Today, 09:34 AM   #98
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My husband and I retired 5 years ago, and at that time I had all our returns back to 1979. We made a move to another state, and I shredded all the old ones then. I flipped through for nostalgia sake (we made nearly $8,000 in 1979!) I haven't missed or needed them at all. Now I only keep 7 years and regularly shred old ones.
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