How long should I keep tax records? The answer ...

Clients ask: How long should I keep tax records? I USED to say six years, but now I scan everything and keep the records forever on an external drive. If you think that's overkill, two recent cases the Tax Court might change your mind. In Amos v. Comm’r (2022, link below), a net operating loss was disallowed because the taxpayer didn't have 20-year-old records to prove the carryover.

In Seaview Trading, LLC v. Commissioner, also decided in 2022, was about a 2001 tax return (yes, 20 years old) that the IRS "displaced" but the company had proof that they had mailed it, then submitted it again to an IRS examiner that asked for it after they lost it the first time. By keeping records, Seaview was able to show that the IRS blew the statute to assess additional tax.

California also has a 20 year collection statute, and I just personally saw a sales tax assessment from CA that was 19 years old on a dissolved business. Better to be safe than sorry, especially as these agencies get more aggressive.

See a great overview on Freeman Law: 

Tax Court in Brief | Amos v. Comm’r | Net Operating Loss Deductions Denied; Penalties Proper

 

 

posted Dec 24, 3:30 pm (35 days ago)