The Danger of the Three-Year Tax Filing Rule
How long should you keep your tax returns?
A lot of people are told that they should keep their tax returns for three years just in case the IRS decides to audit. After all, the IRS has a three-year window in which it can call for an audit after taxes are filed. Taxpayers also have a three-year deadline for filing an amended return to correct any errors that they had submitted earlier.
However, there is a loophole to the three-year tax filing rule. If the IRS suspects that over 25% of reported income was not declared in a tax filing year, it can investigate the past six years of a person or company’s tax filings. If the IRS can prove that a taxpayer or business has filed a fraudulent return, the IRS can go even further back.
The three-year rule has another catch. If a taxpayer doesn’t file an income tax return, the three-year rule will not go into effect until after the taxes are filed.
Lastly, the three-year rule only applies if the taxpayer can prove that he/she has filed an income tax return. If the IRS claims that it never received the filing, the IRS will assume that the taxpayer didn’t file and the taxpayer will have to prove that he/she did.
Therefore, it is advisable for all taxpayers to keep copies of all tax filings going back at least ten years along with postage receipts and confirmation emails for those who filed their taxes online. Showing proof that taxes were filed for any given year will, in most cases, satisfy a lot of IRS demands.
If you are being audited by the IRS for delinquent tax filings, we are here to help you. Anderson Bradshaw Tax Consultants offer the professional experience and legal knowledge to help remedy your tax debt with the IRS so that you can return to a more productive, happier life. In fact, we have helped thousands of people negotiate settlements that have allowed them to spend more quality time with their family and friends.
We’d love to help you!