If:

1. You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
2. You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years.
3. You file a fraudulent return; keep records indefinitely.
4. You do not file a return; keep records indefinitely.
5. You file a claim for credit or refund after you file your return; 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.
6. You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.
7. Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

Property records should be held on to indefinitely in order to prove the amount of loss or gain to the IRS if you sell said property. Life insurance policies should be saved for the length of the plan, plus three years. Keeping previously filed tax information helps when preparing future tax returns, and when necessary, making computations if you file an amended return.

As your records grow, you may consider investing in an online archival system like OfficeDrop. Time will have increased your need for space, while it may have damaged some documents. Documents like expense receipts fade and you don’t want your tax records exposed to moisture and fire. Digitizing your documents enables anytime access to your growing tax collection and eliminates possible damage from the elements. So if and when the IRS comes knocking, you’ll have the documentation you need at your fingertips.

Of course, this is complicated stuff, we’ve tried to simplify it to an extent, but please consult your tax preparer if you have any questions.