Even if I had a refund coming, which I never do, I would not be able to face up to preparing an income tax return in February.
But some people do. And when they begin pulling check stubs, records, bills and other tax data out of their files, they begin wondering how long IRS expects a taxpayer to retain such ancient history. As one reader put it this week:
For heaven's sake don't use my name in the column and thereby give somebody at Eternal Revenue the idea, 'Hey, maybe we ought to audit this guy.' But try to get us an official answer to a simple question: For how long are we legally required to retain backup data and records that are the basis for a return? I'd like to clean out everything that's more than five years old. Can they make trouble for me if I do it?"
I put the question to Leon Levine at IRS, and he answered with the quiet assurance of a man who has covered this ground many times before. As I understand his response, he said this:
Generally speaking, a taxpayer is required to retain "for as long as they may be required" any records that are needed by IRS in the proper administration of our tax laws.
"It's not as bad as it sounds," he added. "When no fraud or major understatement of income is involved, there is a three-year limit on most backup data that the taxpayer must retain. However, when fraud is involved, the limit does not apply. And, fraud or no fraud, some records must be kept for much longer periods because common sense tells you they will be needed some day."
"Like what?" I asked.
"Well," he said, "for example if you buy a house and then 20 years later you sell it, and perhaps buy another house. Or if you buy some stock and 30 years later you sell it. Common sense tells you that you will have to retain the supporting data on those purchase prices as well as on the selling prices.
"The average citizen is honest," Leon went on, "and doesn't have to worry about fraud charges. If he's cramped for space and wants to clean out old records, he'll probably be on safe ground if he gets rid of many of the things that are more than three or four years old. Personally, I have retained copies of all of my tax returns, and I have kept some supporting data that could probably have been thrown out. But I like to play it safe."
Note: Many states follow the federal procedure and will be satisfied if you retain supporting data for at least three years. However, if your legal residence is still "back home," or if you have moved to this area recently and are not sure about the status of tax returns filed elsewhere, it would be a good idea to check.
I have made several abortive efforts to thin down my own files, but I'm always afraid to throw anything away. There is peace of mind in knowing that somewhere in all those cardboard boxes, the records are intact. But on eventually accumulates so many records that it would take a week of full-time search to find any specific piece of information.