Don’t Toss Your Tax Return Into Dumpster

Now that tax season is over - at least for those who didn’t file for an extension - what do you do with all those records and paperwork you accumulated? And what about the records you kept around from last year and years before? How long do you have to keep this stuff?

For starters, keep in mind some basic rules, says the Institute of Certified Financial Planners.

The Internal Revenue Service has three years from the tax-filing date to conduct an audit of anyone it pleases. You can be selected at random or because the IRS has spotted a red flag in your return.

The IRS has up to six years to challenge your return if it suspects you under-reported your gross income by 25 percent or more. And if you didn’t file at all, or you filed a fraudulent return, the IRS has forever to hunt you down.

So here are the institute’s guidelines on how long to keep records to protect yourself:

Copies of your tax return should be kept indefinitely. You could dump them after six years, but they’re good for financial planning.

Most supporting documents, such as W-2s, 1099s, canceled checks and receipts, can be thrown out after six years - except for those mentioned below. You should keep most records for six years, the institute says, because the IRS may suspect you under-reported your income by 25 percent or more even if you didn’t.

All records concerning your home should be kept for as long as you own the home, plus six years. This includes records of expenditures for improvements, as well as records from when you bought and sold the property. Expenses are added to the base price of the home, and the higher the base the less capital gain you realize when you sell. Taxes on these gains are deferred if you sell, so long as you buy another home within 24 months and the new home costs at least as much as the old one sold for. But taxes would be due if you sold and didn’t buy a new home, or if you sold and bought a cheaper one.

Records for stocks, bonds, mutual funds and any other investment should be kept for at least six years after the investment is sold.

Records of individual-retirement-account contributions should be kept indefinitely, particularly those “not” tax-deductible. These records will help you prove you already paid the tax when your begin to make withdrawals.