How long should records be kept according to IRS guidelines?

The IRS guidelines generally recommend keeping records for at least three years. This duration allows the IRS to audit returns and review records associated with those returns. However, there are specific circumstances that may extend the time period for retaining records, such as situations involving fraud or if a return isn't filed.

The recommendation to keep records for seven years specifically applies to instances where a taxpayer has claimed a loss from worthless securities or has claimed a deduction for bad debts. In cases of underreporting income, if it's more than 25% of the gross income shown on the return, the IRS suggests retaining records for six years.

In summary, while three years is the standard guideline, the requirement to keep records for seven years is particularly valid for specific situations. Therefore, the guidance regarding varying retention periods is essential to ensure compliance with IRS regulations.