Statute of Limitations
If the IRS suspects you underreported income by less than 25 percent due to an honest error, the agency has three years to inspect your return. After that period, the statute of limitations expires. However, the IRS has up to six years if you underreported income by more than 25 percent and seven years if you claimed a loss from worthless securities or bad debts. If the IRS suspects you fraudulently filed a return, there is no statute of limitations on return inspections.
What to Keep
At a minimum, keep a copy of your filed tax returns and any supporting documentation. Typical supporting documentation includes W-2s and Form 1099s. Keep copies of documentation for any itemized expenses, like charitable donation receipts, mileage expenses and medical expenses. Since the IRS accepts electronic documentation, it's OK to maintain digital copies of these documents as opposed to hard copies.