Many of us need to keep records that validate our tax return or for other important life events for as long as they are needed. Here are some basic rules of thumb to help you with what documents are needed and which are not.
- During an audit period, your federal tax return is generally examined three years from the later of the tax return filing due date or the actual filing date.
- However, if errors on your tax return are calculated to be over 25% of your tax obligation, then you may require a longer retention of 6 years or indefinite if fraud is established.
- In addition, some items should be kept indefinitely. These could include copies of your 1040 tax returns, as previously discussed, major asset purchases and sales such as home closing statements, investment or stock documents, divorce decrees, record of insurance, and birth, death or marriage certificates.
- Personal and family health and medical records should be kept indefinitely.
- You may want to keep your documents for valuable items purchased. For instance, jewelry and other collectibles.