Do you really only keep 7 years tax returns?

[Letj]

I have kept all my tax returns but as far as tracking basis for investment I find that to be a pain to file every record of monthly investments and reinvested dividends/capital gains. Doesn’t the brokerage maintain information on your basis?

 

[braumeister]

Doesn’t the brokerage maintain information on your basis?

They should, but they have only had to do that for about the last ten years.
And there is always the issue of data being lost when you transfer an account from one brokerage to another, especially in prior years. So it's wise to keep as much of a record as you can.

 

[RunningBum]

They should, but they have only had to do that for about the last ten years.
And there is always the issue of data being lost when you transfer an account from one brokerage to another, especially in prior years. So it's wise to keep as much of a record as you can.

Right. I closed a credit union account one year, and the following January I got an email that my tax forms were online and ready. Problem is, they closed my account the day I transferred the last money out! I called and they did mail me a paper copy.

 

[RunningBum]

I've thought about digitizing all my 2020 tax stuff, and telling VG that I'll take E-statements of my 1099s. But I really like checking things off as I record them, and I also think if I died or became incapable that it'd be easier for my son to fill out my last taxes with hard copy statements.

 

[Letj]

They should, but they have only had to do that for about the last ten years.

And there is always the issue of data being lost when you transfer an account from one brokerage to another, especially in prior years. So it's wise to keep as much of a record as you can.

I guess I am just confused about how the process works. When I review my portfolio, it usually shows me from inception including additions and reinvested income. I was hoping this would be sufficient for the IRS. What am I missing?

 

[athena53]

Gosh no. Especially if you own any type of property that has tax consequences (ie IRA's, real estate etc).

The IRS says that you need to keep your records until you have disposed of the property -- even if it is more than 7 years.

-gauss

I think rentals are a major complication. A friend who owns rental properties was subjected to a very rigorous audit- I think he said they went back 30 years on some properties. Thanks to his scrupulous record-keeping and his honesty, he ended up getting a small refund when it was all over.

I have paper files going back to 2012, I think. IMO, it's not all that important to keep copies of the actual returns (although I do)- the IRS has them and can provide copies. To me, the most important records would be the proof of amounts you itemized such as Medical expenses and Property taxes, which the IRS doesn't get with your filing.

 

[badatmath]

Oddly enough I don't even know how many years worth of tax returns I have saved in pdf. . . . Hmm.

Another thing to look at I guess.

 

[Montecfo]

they should, but they have only had to do that for about the last ten years.
And there is always the issue of data being lost when you transfer an account from one brokerage to another, especially in prior years. So it's wise to keep as much of a record as you can.

^^^^ this

 

[Montecfo]

iRS: "we believe you massively understated your income 5 years ago."

Taxpayer: " you can't prove that, cuz I shredded all the evidence."

IRS: " Not my problem. Here is your assessment of tax penalty and interest."

Granted, these are remote risks but keeping 7 years of tax returns and support should be a minimum for most taxpayers.

 

[Poopycat]

During my last move, I finally got rid of the really, really old tax returns and just kept the last 7 years. I’ll take my chances that I won’t be audited for anything before 2013.

 

[rk911]

I was on a shredding binge today where I found that apparently I never do any . . . Had the purchase papers from a car I bought in 1995. . . .

Taxes are next. . . Do I really only need 7 years? Do I ditch the 1099s then too? I probably have at least 20 years. . . Somehow they are hardest of the papers to get rid of.

if you're going to keep hard copies then i would keep whatever was needed and used used to prepare the return. W2's, 1099's, etc. we used to do that but no more.

i have scanned all of our tax returns going back to the 70's right up thru 2019 and i'll be scanning in all of the 2020 forms as they come in. those digital scans are archived several ways. i also keep hard copies for the most recent 6-years (old habit). i scan our quarterly reports, bank statements and other documents as well. that really reduced the paped load here. i used to keep canceled checks for 5 or 6 years back in the day but i can't recall ever needing to find an old check for anything other than nostalgia purposes. when we cleaned out my father-in-law's home we found receipts for 60-yr old utility bills!

 

[Brat]

After my mother passed I was going through her files and found tax returns dating back to the 1950s. Fascinating....

 

[rk911]

I thought the IRS can only audit you within 3 years?

all bets are off on that if fraud is suspected

 

[badatmath]

The older ones I had copied . . . on floppy disks and CDs. Oops.

 

[teejayevans]

all bets are off on that if fraud is suspected

Then it’s 6 years.

But only forever if you don’t file at all or completely omit forms.

https://www.forbes.com/sites/robert...forever-how-to-cut-your-risk/?sh=50c2edc37ba6

 

[Badger]

l have our tax returns and supporting paperwork back to at least 2012. I may have them farther back than that but not sure where they are. Those 8 that I can access quickly have all been done through AARP at the local library. I know they keep the previous year records but not sure how far back they might save. However, for at least a couple of decades we have filed standard deduction so I don't know how important it is to save them. The IRS has all the information I have but I will save them anyway.


Cheers!

 

[lem1955]

We just took money from ROTH accounts for the first time. Both DW and I are well over 59.5. Turbo Tax asked for the amount of total contributions (not including conversions) to ROTH accounts. I haven't kept those records per se, but since Turbo Tax has asked for contribution amounts in the past, last year's pdf of our tax return had an accumulated amount! Yikes. That saved me a major headache.

 

[teejayevans]

We just took money from ROTH accounts for the first time. Both DW and I are well over 59.5. Turbo Tax asked for the amount of total contributions (not including conversions) to ROTH accounts. I haven't kept those records per se, but since Turbo Tax has asked for contribution amounts in the past, last year's pdf of our tax return had an accumulated amount! Yikes. That saved me a major headache.

Was the Roth less than 5 years old?

 

[cathy63]

We just took money from ROTH accounts for the first time. Both DW and I are well over 59.5. Turbo Tax asked for the amount of total contributions (not including conversions) to ROTH accounts. I haven't kept those records per se, but since Turbo Tax has asked for contribution amounts in the past, last year's pdf of our tax return had an accumulated amount! Yikes. That saved me a major headache.

I've noticed that TTax asks that question and offers to track your Roth basis, but if you've had a Roth account for more than 5 years, the answer doesn't matter anyway. They should really change that screen so that it asks you when you established your first Roth and then only asks about contributions if you say it's less than 5 years old.

 

[Sunset]

I've noticed that TTax asks that question and offers to track your Roth basis, but if you've had a Roth account for more than 5 years, the answer doesn't matter anyway. They should really change that screen so that it asks you when you established your first Roth and then only asks about contributions if you say it's less than 5 years old.

Whew...... Thanks for answering that , as I suddenly thought with horror how would I track the contributions made for all the years for both of us...
I never thought about it, since I believed it's non-taxable when withdrawn since taxes were already paid on contributions.

 

[Al in Ohio]

I used to keep mine up to five years but then found out that was too much. It’s three years back per the IRS. After three years you cannot be audited and you will hever be questioned beyond three years prior. So pitch it!

 

[Rotaflex]

I bought myself a Fujitsu IX500 scanner and just scan everything. If/when it passes legal limit or runs out of physical space, shred the paper version. Saves me time thinking about.

 

[Rex]

So the IRS says 3 years but I keep a rolling file with 4 years...I never understood when year 3 ended and year 4 began.

I also keep closing statements for homes until 4 years after sold (same file).

The actual returns are all saved digitally (& on TT).....the receipts, w2s, 1098s, etc, is what's in the paper file....and it has become a slim file over the years....But I also don't bother to print investment firm tax documents if they have their 7 years archived online. I figure I can fetch them if the IRS comes calling.

 

[ncbill]

iRS: "we believe you massively understated your income 5 years ago."

Taxpayer: " you can't prove that, cuz I shredded all the evidence."

IRS: " Not my problem. Here is your assessment of tax penalty and interest."

Granted, these are remote risks but keeping 7 years of tax returns and support should be a minimum for most taxpayers.

Once you're past 3 years that's not how it works:

https://www.americanbar.org/groups/business_law/publications/blt/2017/08/06_wood/

 

[cathy63]

So the IRS says 3 years but I keep a rolling file with 4 years...I never understood when year 3 ended and year 4 began.

I also keep closing statements for homes until 4 years after sold (same file).

The actual returns are all saved digitally (& on TT).....the receipts, w2s, 1098s, etc, is what's in the paper file....and it has become a slim file over the years....But I also don't bother to print investment firm tax documents if they have their 7 years archived online. I figure I can fetch them if the IRS comes calling.

It's 3 years after the return is due (including extensions) or when you file, whichever is later. If you file your 2020 tax return on or before April 15, 2021, then you should keep the records until April 15, 2024.