Tax return records need to be kept on file for over 3 years

People in Maryland might have heard that they should keep copies of their federal tax returns for three years. This guideline represents a minimum recommendation that does not necessarily protect people from all inquiries from the Internal Revenue Service. Although the agency generally has three years to decide if it is going to audit a person or require additional tax payments, some situations extend the statute of limitations.

In the case of returns deemed to be fraudulent, the IRS has no restrictions upon the years that it can examine. Tax filings that underreport income by more than 25 percent could come under scrutiny for up to six years. For people who completely fail to file a return, no statute of limitations applies because the act of filing initiates the three-year period of review.

At times, the IRS loses records about people's tax returns. If the agency asks for a copy of a filing, people can prove that they sent in returns by producing copies of their filings. Without the timely presentation of tax return records, one might face the prospect of the agency declaring that a return was never filed. This would remove any protection provided by statutes of limitations.

To comply with unexpected inquiries, taxpayers should keep printed copies of their paperwork or store them digitally in a safe location. A receipt for electronic filing provided by the IRS website or confirmation email should be printed or stored to show when a return was submitted.

Legal advice could be appropriate when one receives a notice from the IRS about potential noncompliance. An attorney familiar with audits could assist with the organization of financial records before meeting with auditors. With legal support, a taxpayer might pass an audit review or negotiate a settlement.

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