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Keeping older tax returns can be important

| Aug 7, 2018 | Tax Law

Many people in Minnesota assume that they should hold on to their tax returns for three years after the initial filing. In general, the Internal Revenue Service (IRS) has three years to perform an audit or assess additional taxes; three years is also the time limit during which people can file amended tax returns. However, there are exceptions to the three-year rule, and this could make it important to hold on to tax returns for much longer.

When over 25 percent of income was not included on a tax return, the IRS actually has six years to perform an audit and assess further taxes. In addition, if the IRS can prove that the original return was fraudulent, there is no statute of limitations on a tax audit or additional assessment. It should also be noted that even if a person is certain that neither of these cases applies to his or her tax returns, this does not make it a good idea to discard the original filings after three years. Without an original copy, it may be difficult to prove that the tax return was ever filed at all, and these statutes of limitations apply only after the filing was made.

People may rely on the IRS to keep accurate and complete records, but that may not always be the case. The IRS could come back and request an earlier return, and without a copy on hand, people could face significant expenses to recreate their earlier filings.

People can face unexpected tax issues, even years after their initial filings. This is especially true for entrepreneurs, self-employed people and others with more complicated tax returns. When people are contacted by the IRS or are concerned about the potential for an audit, a tax lawyer may be able to provide strong counsel and experienced representation throughout the process.

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