One of the biggest fears Massachusetts residents have when they submit their tax returns is that they’ll end up being audited. No one wants to go through that, but, without fail, every year, a small percentage of people get the news that they have been selected for tax audits. Keeping good records is something people can do that is simple and can help them through the audit process, but how long should records be kept?
Due to staffing issues, the IRS is not likely to audit someone’s tax return the same year it is filed. There is a statute of limitations for how long the Internal Revenue Service has to start the audit process. For the typical taxpayer, the IRS has three years from the time the tax return has been filed to begin an audit. If a significant error is suspected, the statute of limitations extends to six years. If one is thought to have committed a tax crime, the statute of limitations does not apply.
Knowing what the statute of limitations is can help people determine how long they need to hold onto their records. Keeping them for a minimum of three years is recommended. However, there is no harm in keeping them a little longer than that to be on the safe side. It all comes down to personal choice.
Having documentation to back up the information included in tax returns can help tax audits go quickly and smoothly. Having legal counsel at one’s side may also help the process. With assistance, Massachusetts residents can face tax audits without fear and do what is necessary to fight for fair outcomes.