The IRS is able to audit your tax return for three years after you file it and you are able to amend a tax return for three years after it is due. So you should keep at least 3 years of tax forms and tax documents, showing all your income, expenses and deductions for that amount of time. This year, you will want to have tax files for 2014, 2013, and 2012. Obamacare has also added the need to keep track of health insurance records along with your tax documents starting this tax season.
If you tax return is more complicated than a basic 1040 and a schedule A, then consider keeping the information longer. The IRS can audit a small business up to 6 years to determine if it has claimed all of its income during that period of time. Keeping asset purchase information until you sell the asset is very helpful in determining the basis. And non-deductible contributions to retirement plans can be recorded so that you do not pay tax again when you take the money out.
Brokers are now required to keep records of stock purchases made in the last four years while keeping the records for mutual funds purchased over the last three years. This is very helpful for the individual as you can compare your records to those kept by your broker. And if you reinvest dividends that have already been taxed, keep a record so that you are not taxed again when you sell the asset later.
How long to keep tax documents