9. Keeping Good Records

Keeping tax records
How long should you keep tax records? Keep copies of all your filed tax returns forever. They help in preparing future tax returns and making changes if you file an amended return.  Generally, these guidelines apply to other tax records.

1. You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for three years.
2. You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for six years.
3. You file a fraudulent return; keep records indefinitely.
4. You do not file a return; keep records indefinitely.
5. You file a claim for credit or refund after you file your return; keep records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.
6. You file a claim for a loss from worthless securities or bad debt deduction; keep records for seven years.
7. Keep all employment tax records for at least four years after the date that the tax becomes due or is paid, whichever is later.

But you don't have to keep everything for tax purposes. You can lighten your record load by discarding certain checks and bills once they have served their purpose. For example, you can throw away weekly or monthly payroll stubs after you check them against your annual W-2 Form. But save cancelled checks that relate directly to an entry on your tax return and keep all medical bills for three years to back up your cancelled checks.