Okay, so we’re going through my grandparents’ house, cleaning it up to be sold. (Grandma died last year, Papap’s in assisted living)
And my grandfather is a notorious packrat. We’re finding all kinds of junk and crap he saved over the years. I was cleaning out a file cabinet, and finding tax returns and such from as far back as 1978.
Is it typical to keep them that long?
Check the IRS site, I’ll bet it’s in their FAQ’s. As I recall they reccomend four years. They don’t usually go further back than that unless they suspect some ongoing criminal activity.
The IRS has only three years to audit a tax return, unless they think that you didn’t report over 25% of your income in a particulr year, in which they have six years, or if you didn’t file a tax return when you were supposed to, in which case there’s no time limit.
The returns themselves should be kept, but all other records over 6 years old can be chucked.
I found all my parents’ tax receipts, going back to ***the '30s!!! ***They also kept ever single receipt for furniture, home improvements, etc.
Find out from the attorney who will handle his estate what you need to keep that will be beneficial to handling his estate when he dies. An example might be papers that change the tax basis of a home. Lose the rest. No papers is better than a paper trail except for the things that will benefit the heirs. The IRS and others can’t contest papers that are not there. Only an attorney can tell you what will protect your interest and what will jeopardize it.
It seems to me that IRS publication 552 is deliberately vague such that there is no limit on how long you must keep the records, or that they can audit you. For example, while they claim that the standard length of time is 3 years, if they allege “fraud” (Table 3, section 3) then there is no limit. I mean, it looks like all they have to do is allege fraud and you’re going to be going over a 30+ year-old set of tax records and returns.
My Bro the Tax expert sez Three Years. (From the date filed if filed late, mind you!) Now, he has a few caveats: 3 years after you sell or dispose of a Capital asset. So you need to keep records on the house until 3 years after *you sell it. *
So for Grandads house you need to find records relating to the purchase and Capital improvements on the house. Additions, pool, major stuff like that, not simple replacements or repairs.
And the actual Tax return itself? My Bro suggests 5-10 years. The 1040 itself takes up almost no space and you might need to prove you filed.
Una: it is a bit harder than that. Yes, if they “allege” fraud they can go back 10 years or so. But if they don’t* prove* fraud (by you agreeing it was fraud or a Court declaring you guilty), they can not assess the taxes past 3 years. So they can “assert” all they want but it is meaningless unless they can prove. My Bro won a major battle that way, his clients (who had gotten some very bad advice from Tax Protestors) had fraud “alleged”. Well, Bor went in, and “plea bargained” in Appeals to “only” Deliquency, Substancial Understatement and Negligence. But no Fraud. Bro even signed the Deficiency Notice for the old years. But when they got all done, Bro said; “But you do remember you can not assess the taxs on these years here, right? The SOL is barred as there is no Fraud.” They still had to pay a lot, mind you, but only for 4 years (one year was so late it was still within the SOL).
One exception, if the IRS can show understated income by 25% they have 6 years- but usually only on the income, so records don’t help much there anyway.
I’m not sure this is what you meant, but “losing” papers not in your best interest sounds an awful lot like that “fraud” that everyone keeps mentioning. Remember that when you get to the bottom of the tax forms, you’ll have to sign that to the best of your knowledge, you’ve not failed to report anything.