How Long to Keep Tax Returns (according to the IRS)
For the actual tax return itself, the IRS advises keeping them forever. I would 100% agree with that. Especially in the digital age, where everything can be saved on a hard drive or backed up in the cloud, there’s no reason to toss your actual tax returns.
Period of Limitations That Apply to Income Tax Returns
1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.2. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later if you file a claim for credit or refund after filing your return.3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
How Long Should I Keep Tax Returns as a Small Business Owner?
According to the IRS guidelines above, they have up to six years to audit you if you forgot or neglected to report at least 25% of your income.For that reason, a business owner probably should plan to keep at least six years worth of 1099s and other records of business income and expenses to be safe.
What if I Have Claimed Investment Losses or Bad Debt Write-Offs?
The silver lining is you get to claim this loss to offset your income (in most cases) on your tax return. However, per the IRS, filing a claim of loss for bad debt or a worthless investment triggers a seven-year period of limitations.