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Keeping tax records forever isn’t a bad idea

On Behalf of | Jan 10, 2019 | Tax Audits

Georgia residents and others are advised to keep a physical and digital copy of a tax return for as long as they live. This can be helpful in the event that the IRS claims a person hasn’t filed a return in a given year or filed a fraudulent return. Furthermore, the government generally has no deadline to come after a taxpayer who understates his or her income on a tax return.

This is true even if an investigation is launched in error. This means that a person still needs to prove that a return was filed or filed accurately even its because of inaccurate IRS records. As long as a taxpayer files a return in good faith, the IRS generally has three years to audit that return. A taxpayer has three years to amend a return if a mistake was discovered that may entitle that individual to a refund.

In the event that an audit occurs or a return is amended, a taxpayer should keep his or her return for an additional two years. The IRS has six years to audit a return if it believes a person understated his or her income by more than 25 percent. Keep a tax return for seven years when claiming a capital gains loss because of a bad security or if a loan was not repaid in full.

Failure to file a tax return or pay taxes owed could result in negative consequences for a taxpayer. If the IRS initiates an investigation, it may be in a person’s best interest to hire an attorney. The lawyer might be able to help a taxpayer gather relevant records and negotiate with the IRS. This may result in an investigation concluding without a taxpayer owing any additional money to the federal government.