Posted July 2015

Perhaps one of the most repeatedly asked questions of accountants (just ahead of “Why is my neighbor paying less in taxes than I am when we both are the same?”).  So I will try to address it simply.

Audits can occur any time up to 3 years after you filed the return, including due dates.  So to be simple, I usually suggest 5 years.

What do you need to save?  Only those items that support deductions (or the income reported for a business, etc.) taken on a tax return.  You do not need to save grocery receipts unless, i.e., you run a Child Care facility out of your home. You don’t need to save utility bills unless you are claiming an office-in-home deduction.  

If it is not tax related, you do not need to save it.

Me … I save things for 7 years, probably because I am compulsive (and too lazy to thin things out).  And now that I store everything electronically, I don’t even think of deleting items (because I never know when I will need to see what I paid for a burrito at Chipotle in 2008 frown  ).

There are some things to save regardless of tax consequences.

Purchases of big ticket, expensive, type items … you want to save those for insurance purposes.  Keep those in a separate file.  Or better yet, scan them and save them as part of your Quicken file.

One caution: If you have underreported your income by 25% or more, the statute of limitations has not started running so you need the records then for all such years if audited.

Caveat:  I am not an attorney and do not play one on TV.  I am also not an insurance agent.  The preceding are just guides and if you have more detailed questions about such records, please speak with your attorney, insurance agent, or your CPA.