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The Tax Resource Group: Professional Tax Research Material, Resources, and Consulting

Category: Tax Returns, Examinations & IRS Procedures
Subject: Retention of Return Information by Tax Preparers
Title: Length of Time Preparers Must Keep Information
IRC Sections: 6107
Filename: 1229.html
Date Produced: 05/95

Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com

Issue
Paid preparers of tax returns are required to retain certain information regarding those returns for specified period of time. What must be kept and for how long?

Answer
The preparer must either retain a copy of the return or as an alternative, maintain a list showing the name, taxpayer identification number, type of return, and tax year for each return prepared. The return copies or the list must be retained for three years after the "return period" which runs from July 1 to June 30.

Discussion
Section 6107 provides requirements for tax return preparers with respect to retaining copies of the returns or alternatively maintaining lists of returns prepared. Section 6107(b) provides as follows.

Any person who is an income tax return preparer with respect to a return or claim for refund shall, for the period ending 3 years after the close of the return period--

6107(b)(1) retain a completed copy of such return or claim, or retain, on a list, the name and taxpayer identification number of the taxpayer for whom such return or claim was prepared, and

6107(b)(2) make such copy or list available for inspection upon request by the Secretary.

Per Section 6107(d) and 6060(c), the return period runs from July 1 through June 30. For a calendar year return due without extensions prior to June 30, a copy of the return or a list containing the appropriate information about the return must be kept until fourth June 30 falling after the end of the tax year in question. If the return in question is extended, and the extended due date falls after June 30, the return copy or list must maintained through the fifth June 30.

Example 1
A tax return preparer prepares Form 1040 for the calendar year 1994. The return is not extended and is presented to the taxpayer for signature on April 1, 1995. The preparer must retain a copy of this return until June 30, 1998.

Example 2
A tax return preparer prepares Form 1040 for the calendar year 1994. The return is extended to August 15, 1995 and is presented to the taxpayer for signature on August 1, 1995. The preparer must retain a copy of this return until June 30, 1999.

The applicable regulation section is set forth below.

§1.6107-1 Income tax return preparer must furnish copy of return to taxpayer and must retain a copy or record.-- Paragraph (b) Copy or record to be retained.

The person who is an income tax return preparer of any return or claim for refund shall--

(1)(i) Retain a completed copy of the return or claim for refund; or

(ii) Retain a record, by list, card file, or otherwise of the name, taxpayer identification number, and taxable year of the taxpayer (or nontaxable entity) for whom the return or claim for refund was prepared and the type of return or claim for refund prepared;

(2) Retain a record, by retention of a copy of the return or claim for refund, maintenance of a list or card file, or otherwise, for each return or claim for refund presented to the taxpayer (or nontaxable entity) of the name of the individual preparer required to sign the return or claim for refund pursuant to §1.6695-1(b); and

(3) Make the copy or record of returns and claims for refund and record of the individuals required to sign available for inspection upon request by the district director.

The material described in this paragraph (b) shall be retained and kept available for inspection for the 3-year period following the close of the return period during which the return or claim for refund was presented for signature to the taxpayer (or nontaxable entity). However, in the case of a return which becomes due (with extensions, if any) during a return period following the return period during which the return was presented for signature, the material shall be retained and kept available for inspection for the 3-year period following the close of the later return period in which the return became due.

For the definition of "return period" see section 6060(c). If the person subject to the record retention requirements of this
paragraph (b) is a corporation or a partnership which is dissolved before completion of the 3-year period, then all persons who under state law are responsible for the winding up of the affairs of the corporation or partnership shall be subject, on behalf of the corporation or partnership, to these record retention requirements until completion of the 3-year period. If
state law does not specify any person or persons as responsible for winding up, then, collectively, the directors or general partners shall be subject, on behalf of the corporation or partnership, to the record retention requirements of this paragraph (b). For purposes of the penalty imposed by section 6695(d), such designated persons shall be deemed to be the income tax return preparer and will be jointly and severally liable for each failure.