By Jason Watson (Google+)
Ah, the question of the century.
Receipts, Proof of Payments: These should be kept for 3 years after the filing of your tax return. This coincides with the IRS’s statute of limitations for examination. However, if you file a fraudulent tax return or do not file a tax return at all, there is not a period of limitations. In other words, if the IRS considers your super-old tax return fraudulent the period of limitations is tossed out, and you need to prove your income and deductions.
Property: The cost of homes, business assets, rental properties, stocks, bonds and mutual funds should be keep for three years after the tax consequence was reported on your tax returns. So, you sell your primary residence in 2012, you should maintain the purchase records, the improvement records and the sales records through 2016 (2012 tax return is due 2013, plus 3 years, 2016).
In all reality, records should be kept as long as humanly possible. Other stakeholders in your life such as insurance companies, creditors and local governments might need this information for nontax purposes. Buy a good scanner. Sign up for Carbonite. Brew some coffee. And have some peace of mind.