Tax records should be kept year-round, not hastily assembled just for your annual tax appointment. Without tax records, you can lose valuable deductions or have unsubstantiated items disallowed if you’re audited.
Generally, returns can be audited up to three years after filing. However, if income is underreported by more than 25 percent, the IRS can collect underpaid taxes up to six years later. In other words, you need good records to verify what you report on your tax return, and you should hang on to those records for seven years.