The IRS has three years from your tax return filing date to audit your return, if it suspects good faith errors. (For example, your 2013 taxes were due by April 15, 2014. The IRS has until April 15, 2017 to audit your return for good faith errors).
However, the IRS has six years to challenge your return if they think you have under-reported your gross income by 25% or more.
There is no time limit if you fail to file your return, or if you have filed a fraudulent return. You should keep your filed tax returns for at least six years.
If you have made a nondeductible contribution to an IRA or a Roth IRA, you should keep your financial records indefinitely in order to prove that you already paid tax on this money when the time comes to withdraw. You should keep annual summaries from your retirement accounts until you retire, or until you close the account.
Bank records should be kept for at least a year, and perhaps permanently–especially if there are payments made related to your taxes, your business expenses, home improvement costs, and mortgage payments. You should go through your bank records once a year, and shred those items that have no long-term importance.
In terms of bills and credit card receipts, you should permanently keep receipts for large purchases, such as jewelry, appliances, antiques, etc. There will be important if you have a future insurance claim for loss or damages. Keep business- and tax-related expense records for at least 7 years.
Keep all records documenting the purchase price and sales price of any owned real estate. Be sure to keep records documenting permanent improvements, such as remodeling, additions, and installations.
Paycheck stubs – one year. Once you receive your annual W-2 from your employer, make sure the information on your pay stubs matches with the W-2. If it does, shred the stubs.
Consider scanning your financial records to an electronic copy (PDF) and/or storing that information “in the cloud.” There are many providers of cloud storage, including Legal Vault, which I make available to my clients at the Law Office of Joan Medeiros.