Records the IRS says to keep -- and for how long

Basic records are documents that everybody should keep. Although the Internal Revenue Service doesn't require you to keep your records in a particular way, it does urge taxpayers to keep them "in an orderly fashion" and in a safe place.

Here is the IRS list of basic records:

FOR items concerning your ...

KEEP as basic records ...

  • Form(s) W-2
  • Form(s) 1099
  • Bank statements
  • Brokerage statements
  • Form(s) K-1
  • Expenses
  • Sales slips
  • Invoices
  • Receipts
  • Canceled checks or other proof of payment
  • Home
  • Closing statements
  • Purchase and sales invoices
  • Proof of payment
  • Insurance records
  • Form 2119 (if you sold a home before 1998)
  • Investments
  • Brokerage statements
  • Mutual fund statements
  • Form(s) 1099
  • Form(s) 2439
  • And here's how long the IRS suggests you hang onto them:

    IF you ...

    THEN the
    period is ...

    1. Owe additional tax and situations 2, 3 and 4 (below) do not apply to you
    3 years
    2. Do not report income that you should and it is more than 25 percent of the gross income shown on your return
    6 years
    3. File a fraudulent return
    No limit
    4. Do not file a return
    No limit
    5. File a claim for credit or refund after you filed your return
    Later of 3 years or
    2 years after tax
    was paid
    6. File a claim for a loss from worthless securities
    7 years

    Also keep in mind that while the basic IRS review period is three years, there are exceptions -- in the tax collector's favor. If the agency suspects you've underreported your income or has questions about a worthless stock write-off, look out. When examiners believe you've shorted your income amount on a return by 25 percent or more, they can come asking questions up to six years later. Add another 12 months for queries about that bad investment.

    More details on tax record keeping are available in IRS Publication 552, Recordkeeping for Individuals.