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First...Why Keep Records Of Previous Tax Records?
It is important to keep copies of filed tax returns and tax documents. These records help in preparing future tax returns and amending prior returns. Generally, you must keep tax records until the period of limitations for that tax return runs out. The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund. The period of limitations is as follows:
How Long To Keep Tax Records Based on Situation or Tax Violation
Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return. (i.e. Al Capone, O.J. Simpson, and Pete Rose)
Keep records indefinitely if you do not file a return (i.e. Wesley Snipes, Lauryn Hill, and others)
Keep records indefinitely if you file a fraudulent return. (i.e. Martha Stewart, Willie Nelson, and Nicolas Cage)
Keep employment tax records for at least 4 years after the dates that the tax becomes due or is paid, whichever is later.
Records for Property
Records related to property should be kept until the period of limitations expires for the year in which you dispose of the property. These records are needed to figure any depreciation, amortization or depletion deductions or to figure the gain or loss when you sell or dispose of the property.
If you receive property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property.