[ncallaway]

They can go extend the statute of limitations *if you agree*.

So, the statute of limitations seems… pretty ironclad. I don’t understand the issue you’re raising. If you don’t want them to look further back, don’t consent to extending the statute of limitations?

[koolba]

> They can go extend the statute of limitations if you agree.

The way that line is worded, the IRS can compel you to agree by rejecting your current return for lack of documentation.

For example, if you have a capital loss carry over from twenty years ago that you've been rolling over every year (applying the $3,000 deduction limit to ordinary income), they could compel you to allow being audited for the past twenty years or reject allowing you to apply it to the current year.

Since you never know how far back they can go, you effectively have to keep all your documentation forever or risk having them reject your current returns until you comply.

[gamblor956]

That's not correct, at all.

If you are claiming a deduction or credit, you are required by law to maintain the documentation proving that you qualify for that deduction.[1] If you can't provide that documentation, they can reject the deduction because there's no proof that you are actually entitled to that deduction. Your word that you super-duper remember having a capital loss 20 years ago that you can still deduct on your current return isn't good enough. They're not "compelling" you to allow your previous 20 years of returns to be audited, they're just upholding the law.

And quite frankly, they aren't going to audit anyone for 20 years of returns over $3000. They don't have the manpower for that.

[1] Once the SOL expires, you can discard that documentation. Tax advisors will generally tell you to keep your documentation for 7 years from when you receive it (because the 6 year window starts in the following year when you file the tax return including that information.)

[ncallaway]

If you’re claiming a capitol loss from 20 years ago in your tax return from 2 years ago, then yes, of course you need to retain that documentation.

You should retain *all* supporting evidence for your returns filed in the last 3 years. If that includes information from years before that, then you should be retaining supporting information for those filings.

There’s no ambiguity there.

[jonhohle]

My understanding is that contributions to retirement are similar. The origin of any contribution needs to be identifiable in perpetuity.