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How long must tax preparers keep paper copies and supporting documents of client returns?

jeanmarc
Level 3

I've always understood this to be 3years. The only IRS publication I can find  on this is dated Internal Revenue Bulletin: 2012-11 so I thought I'd ask to be sure. One website said 7 years but I don't know if they are trustworthy.

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6 Comments 6
dkh
Level 15
qbteachmt
Level 15

"One website said 7 years"

This is more of a Practice Advice question. You would understand that record retention for the professional preparer is not the same as for the taxpayer. You provided a service to them in the line of your authority to file on their behalf, so your responsibilities are different than the taxpayer's personal responsibility. You might like to read this:

https://www.aicpa-cima.com/resources/article/document-retention-faqs-for-tax-practitioners

In general, you want to have whatever your client might need for as long as a client might need it. Beyond that, you need to provide for your own professional needs.

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TaxGuyBill
Level 15

For the most part, it is three years for Federal income tax returns (States vary) and four years for payroll.

However, it is interesting that "three years" isn't what you may expect, and could be closer to four years.  Below is an excerpt of an article that mentions the weird timing, as well as some other interesting information about how long we need to keep records (and some thoughts about keeping them longer).

 

"The return copies or the list must be maintained for three years after the close of the return period (as defined in Sec. 6060(c)). Unfortunately, the term “return period” as defined for this section is most likely not the period that most practitioners would anticipate. Rather, it is the 12-month period beginning on July 1 of each year and is unrelated to the tax return period or the tax return deadline.

For example, a tax preparer prepares and delivers an individual 2022 return in August 2023. The “return period” per the Sec. 6060(c) definition ends on June 30, 2024, so a copy of the return (or the list) would need to be maintained until June 30, 2027."

https://www.thetaxadviser.com/issues/2023/feb/documentation-and-recordkeeping-for-tax-practitioners....

 

qbteachmt
Level 15

"it is the 12-month period beginning on July 1"

That's interesting. I always start counting from the filing date, not the tax year, anyway. Then, you have to consider audits: 3 years lookback + 3 more if they don't like what they find at first. And for me, the worst is when I confirm with a client they don't need anything returned, so I shred their stuff, and later they call and ask for it.

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MICHAELMARS
Level 5

Some states have their own rules that need to be followed.  NY preparers are 7 years.

abctax55
Level 15

CA is also advised at seven years also.

And yes, it's from the filing date (so one has to be careful with any late filed returns...)

 

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