by Nancy Osborne, COO of ERATE®
The obligation for calculating any tax liability rests solely with you, the taxpayer, as does the responsibility for keeping adequate tax records. Good records are a prerequisite for determining and accurately calculating your tax obligation and your records will support and provide documentation of this calculation if your tax return is called into question. Typically the IRS has up to 3 years from the date a return is filed to either question it or ask for additional supporting documentation. However if the IRS has reason to believe your income was grossly misrepresented they may go back even further, up to the prior 6 years. There are some taxable events which are spread out over a period of time extending beyond a single tax year, for example real estate and other types of investments. For taxable events such as these, you may want to maintain all records covering the period of time relating to the transaction and beyond.
The following are suggested time tables for retaining your tax records:
It is important to note that each state has its own statute of limitations for state income tax audits and the individual state limit could exceed that of the federal limit. Be sure you are aware of your own pertinent state(s) requirements for tax record retention and be sure to comply with it as well as the federal limit.
Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.
"I am addicted to Bloomberg TV" says Nancy.