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Chapter 6. Income Taxes > Now That You Have Prepared Your Taxes, What Documents...

Now That You Have Prepared Your Taxes, What Documents Do You Keep?

The starting point for determining which records you should keep and which you can throw away is three years, which is the period of time after you have filed your income tax return during which the IRS can audit that return. However, packrats like myself would point out that the IRS actually has up to six years in which to audit your return if they say that you underreported your income by at least 25%.

All those pesky receipts from credit cards, bank statements and canceled checks can probably be safely tossed out after three years. Records and receipts for home improvements, however, should be kept until you sell your home since they affect the tax basis of your home and help with the later computations of possible capital gains taxes.


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