With the technology available today, keeping records may not seem as difficult as it did in the past when most things were on paper. However, that does not always resolve the issue of how long Massachusetts taxpayers should retain their tax records. When it comes to taxes and statute of limitations, how long the paperwork should be kept largely depends on the information, but a good rule of thumb would be to keep relevant tax paperwork, including prior returns, as long as possible.
Having said that, most people need to make sure they keep their prior returns for at least three years. This time begins running either from the date the taxes are filed or the date they are due. Any documentation regarding property you own, such as automobiles, real estate and more, also needs to be kept at least three years.
Under certain circumstances, they need to be retained longer. For instance, documentation regarding matters such as bad debts, employment taxes or worthless securities should be retained for at least seven years. Even though the IRS generally has the initial three years to begin an audit, agents may want records going back further depending on an individual Massachusetts resident’s tax situation. Therefore, he or she needs to be prepared to produce older records upon request.
It might be a good idea to consult with an attorney experienced in taxes and statute of limitations in order to ensure that records are kept for at least the minimum amount of time. Of course, the optimal situation would be to do everything possible to avoid the possibility of an audit in the first place. However, that may not always work, so being prepared is the next best option.