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More on record retention
October 8, 2021
More on record retention from article on from September 13, 2021
            Regarding Hank Luks’ question on record retention, the simple answer is, “it’s not simple.”
            The statute of limitations on Federal tax returns is generally 3 years from the date that the return was due, or filed, whichever is later.  For example, your 2020 1040 was due on May 17, 2021 (Congress extended the date one month from April 15th, but May 15th was a Saturday so it was due on May 17th) but you had the option of filing for an automatic extension until October 15th.  So, if you extend your return and file it on October 15th, the IRS can generally audit it until October of 2024.  This is generally the case, but, under certain circumstances, the statutes can run longer.  For example, if the IRS believes that you have understated your income by more than 25% they have six years, if they suspect fraud, there is no limitation.  If you file the return late, the statutes begin the day that you file the return, if you amend it, they reset the day that you file the amended return, and, if you don’t file a return at all, there is no statute, they can audit you at any time (if you don’t file, they can, and often do, file one for you).  One other issue that you may run into is that some amounts on your return are dependent on amounts from previous returns.  For example, if you purchased a Maserati for business use in 2020, and because of depreciation limitations, have to depreciate it over ten years, the IRS might ask for the purchase documents when auditing your 2030 return in 2034.  Every State has its own statute of limitations and they generally run from three to six years.
            We advise our clients to retain documents for seven years.  This gets us past the statutory limits for most returns.   The lawyers tell us that this gets them past the civil statutes that might necessitate producing the records.   This also gets us past the retention time periods for most depreciable assets.  Keep in mind that certain tax events, such as a loss carryforward, may necessitate keeping documents (or at least copies of returns) for as much as six years.  We scan all of the returns that we prepare, and the supporting documents and keep them (along with a backup) indefinitely.  We keep paper copies of all of our files in our office for four years, then move them to secure storage for another three years.  Each December we bring out a shredding truck and shred most of our eight year old documents.  We keep a few files (litigation support, audited returns, or any other files that may be subject to review or litigation, indefinitely). 
            My advice is to invest in a nice scanner, scan everything, and keep the info indefinitely.  I would also hang onto paper documents for seven years, but I would make certain that they are stored very securely. 
 Mitch Reitman
Reitman Consulting Group
Fort Worth, TX
            Per our local Ohio Attorney keep records for 8 years from the date you stop services in case of future dispute.
            One thing is for sure; there is no such thing as "too long".

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