After B and I finished our taxes (confession: I didn't really do a thing -- he happily did them all from start to finish!), I suggested that we wade through our paper records, consolidate things, get rid of old records that we didn't need, etc. In the process, I did a bit of research on exactly what we should keep in case we were ::gasp:: audited.
- The statute of limitations for an audit is just three years.
- Unless the difference in reported income is >25% of your gross income, in which case the statute of limitations is six years.
- For any rule breakers out there, there's no statute of limitations for complete tax fraud; so basically infinity years.
The experts recommend that you hang on to your tax returns and related documents (W2, 1029, deduction receipt, etc.) for the duration, or at least for 6-7 years. In addition, you should hang on to bank statements for the window of time that the bank allows you to challenge charges.
Moral of the story: set yourself free from unnecessary financial records -- shred 'em, baby.
Liberating, huh?
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