Tax returns are audited by the Internal Revenue Service within 3 years. Keep records that document tax deductions for at least this time period. However, some experts recommend that you keep records that document tax deductions for up to 7 years. In certain situations, such as under-reporting of more than 25% of income, the IRS can collect taxes owed for up to 6 years. If fraud is involved or a return is not filed, there is no limit on when a return may be audited.
Keep records related to property values, home improvements, investments, etc. that are needed to determine capital gains (or losses) until the asset is sold and then at least 3 to 7 additional years.
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