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Document Retention
Federal law requires you to maintain your tax return copies and supporting documents for 3 years, known as the "three year law."
If the IRS believes you have under-reported your income by 25% or more, or suspect fraud, they can go back 6 years in an audit.
To be safe, follow these guidelines:
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Create a Backup Set of Records and Store Them Electronically. Keeping a backup set of records -- including, for example, bank statements, tax returns, insurance policies, is easier than ever now that financial institutions provide statements and documents electronically, and financial information is available online.
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Even if the original records are only on paper, they can be scanned and converted to a digital format.
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Once the documents are in electronic form, taxpayers can download them to a backup storage device, such as an external hard drive.
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Online backup, is really the only way to be sure your data is fully protected and remains safe in the event of a natural disaster or personal emergency.
