Retention of tax returns and associated documents

I'm trying to reduce clutter of tax returns from previous years, after having scanned in several year's worth.

On the IRS's "How long should I keep records" web page, one of the exceptions to the three year rule is if you file a fraudulent return, in which case you need to keep records indefinitely. I have never filed a fraudulent return, but can the IRS say for example that they suspect my 1986 return is fraudulent and ask for supporting documentation? If that's the case, then it would seem everyone would need to keep returns forever. Please advise.

Also, the web page says that an insurance company might require you to keep tax records longer than the IRS does. Under what circumstances would an insurance company request your tax return?

Thank you.

Reply to
Barry R
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On Tuesday, February 19, 2019 at 5:45:59 PM UTC-8, Barry R wrote: ...

I'll leave this to the lawyers about what is needed to allege fraud, although I suspect it would require more than just a desire to look back further in time.

Records can include more than just the tax returns. So, for example, if you buy stocks, you may need to keep records relating to the purchase price until you sell the assets. And then for the 3 years or so afterward.

I don't know for sure what an insurance company would require. Perhaps some records relating to purchase price of a house and renovations might be needed to substantiate the value of or quality of a now burned out insured property. But you would presumably need those for the sale of a house as well.

Reply to
taruss

The IRS must show a willful intent to evade tax or defraud the IRS. Without willful intent, you do not have a fraudulent tax return. As such, the person filing the return would know whether or not the return was fraudulent. If there was no willfull intent, then you only need to follow the 3 year or 6 year rule if you worry about being assessed. As others have said, there are other reasons for maintaining records for more than 6 years.

Reply to
Alan

One may not have submitted a fraudulent return but still be accused of such by the IRS, no? Not having any records for the relevant tax year could put one at a disadvantage.

Coincidently, I just read about the IRS decision in 2015 on a Sumner Redstone tax issue from 1972 ! I'm no Sumner Redstone so the IRS would probably not be too interested in me. :-)

Reply to
Barry R

While that's technically true, my understanding is that if they don't come after you after six years, it's highly unlikely that they'll start coming after you at all for income tax issues. It's possible that they may start an investigation that could take more than six years, but that's another story.

That was a gift tax case where no return was ever filed. Gift tax issues have a habit of cropping up later when the donor dies.

As far as income tax is concerned, there are some situations where something you do in an earlier year will affect your taxes in a later year. The statute of limitations doesn't run on the taxes owed in the later year, even if the initial action was done many years before. So documents reflecting things that could affect tax returns in the future should be kept a lot longer than six years - sometimes for life.

Reply to
Stuart O. Bronstein

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