How long do I keep my Tax Return ?

It should come as no surprise that after we file our tax returns every year they become a quick afterthought.  So how long should we “pack away” our tax return and supporting documents?

Taxes may ordinarily be assessed within 3 years of filing your return.   The three-year period starts on the day after the return is filed.  The return is considered filed on the date the IRS receives the return and if it is filed early it is treated as filed on the due date of the return. Basically the 3-years starts April 15th, or later if filed later.  Don’t worry, if you amend your return the 3-year period does not reset.

This 3-year statue prevents the IRS from being able to collect any unpaid tax by a court proceeding or levy after the 3-year assessment period has expired.

So generally, we are told to keep our tax returns for at least 3 years.  Sometimes there are reasons to keep them even longer.

When the IRS mails a statutory notice of deficiency they are temporarily prohibited from making an assessment.  This suspends the 3-year period during that time.  If the taxpayer files a petition the suspension does not end until 60 days after the tax court makes a decision.

It is also important to know that the 3-year assessment period does not apply to fraud cases. In short, if the taxpayer files a false or fraudulent return with the intent to avoid tax, that tax may be collected at anytime. Any portion of an underpayment attributable to fraud may also be collected at any time.

Because the 3-year rule does not apply to fraud cases, it is better to not file a false return and wait until an accurate return can be filed.   This way the 3-year period will at least start at some point. Filing the false or fraudulent return will block the 3-year period from ever starting, allowing the tax to be collected at any time.

There are other reasons why the 3-year limitation may not hold up, or be extended.  The rules may become even more convoluted when considering partnerships and LLCs.  It is important to at least consider the minimum, 3 years from the date your return is considered filed.

Also remember, on the other side of the coin, you have the same 3-years to file a tax return and claim a refund!

And on this one I felt the need to include a disclaimer

In accordance with IRS Circular 230, the information on this Web site is not intended or written to be used, and cannot be used as or considered a “covered opinion” or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes