Record Keeping

Developing a dedicated folder for tax-related documents makes it easier to prepare a tax return and helps if you are audited or receive a notice. 

For tax purposes, the statute of limitations refers to the designated period of time during which a taxpayer can file a tax return and receive a refund or file an amended tax return. The statute of limitations also governs the amount of time that ADOR is able to issue an assessment for a tax deficiency. You must keep records, such as receipts, W-2s, 1099s, and other documents relating to an income source, deduction, or credit, generally until the statute of limitations expires.

Statute of Limitations for Tax Returns 

  1. Individual Income Tax - Keep records for 4 years from the due date or when the return is filed, whichever is later.
  2. Withholding Tax - Keep records for 4 years from the due date or when the return is filed, whichever is later. 
  3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.

 

For income and withholding tax, if tax returns have not been filed, the statute of limitations may be up to seven years.

If a taxpayer omits 25% or more of gross income, gross receipts, gross proceeds of sales, or Arizona adjusted gross income, the tax may be assessed at any time within six years after the return was filed. This applies to individual income tax, corporate income tax, and transaction privilege and use tax, but not to withholding tax.

Period of limitations for refund claims:

4 years - For filing a claim for credit or refund, the period to make a claim generally is 4 years from the date you filed the original return or the due date if you did file for the tax year, whichever is later. Refer to A.R.S. § 42-1106.

7 years - For filing a claim for credit or refund relates to an overpayment on account of the deductibility of a debt as one that became worthless, a loss from worthlessness of a security, an erroneous inclusion of an amount attributable to the recovery of a bad debt, prior tax or delinquency amount due to an adjustment of a bad debt deduction or a loss deduction from worthlessness of a security, the time to make a claim is 7 years from when the return was due.

For more information on the Statute of Limitations, see Arizona Revised Statute (A.R.S.) § 42-1104. Additional expectations to the normal statute of limitations, the Internal Revenue Service (IRS) audits, waivers from the IRS or ADOR, etc.

Before You Toss Records

After your documents are no longer needed for tax records, check to see if you must keep them longer for other purposes before tossing them. 

When they are no longer needed for any purpose, securely shred tax documents to avoid identity theft. Check with your local government office to see if they host free shred-a-thons in your community.