For two decades, I have diligently completed my Form 11 tax returns and punctually settled my preliminary taxes. The majority of my income is more or less evenly split between my ARF distributions and dividend revenues. Additionally, I have routinely reported and paid capital gains tax, whenever necessary. Throughout these years, I have amassed a considerable number of hard-copy documents substantiating these tax returns. My concern currently revolves around the period these documents are required to be held for potential Revenue queries. Despite not ever facing a query regarding my tax returns, I seek clarification on this matter. I understand that the Revenue can question taxpayers for a duration of up to six years, thus, should it be safe for me to discard tax returns from 13 years ago?
Admittedly, it’s a fair amount of paperwork. Your query regarding its necessity is valid. Thankfully, you wouldn’t need to hold onto all of it. There is a general apprehension around discarding documents related to tax returns, a concern shared by an increasing number of individuals as the requirement to file returns is gradually extended to more people. This latest extension includes those hoping to benefit from the rent tax credit.
According to my understanding, the documents have to be kept for less than four years under usual circumstances. Businesses, however, must retain documents relevant to a tax return for six years, whereas for individuals, the crucial number of four years applies, providing all previous rules were adhered to.
This timeline rule comes under Section 959Z (3), of Part 41A of the Taxes Consolidation Act 1997. The Act states that the Revenue holds the right to investigate the legitimacy of a tax return. But, apart from instances involving suspected fraud or negligence, or where a person has not provided an accurate return, Revenue is authorised to conduct investigations under this section within four years following the end of the taxable period during which the return was submitted.
Notably, taxpayers also possess a four-year window after the relevant tax year to claim any tax reliefs or refunds they believe they are entitled to.
Miss the four-year deadline, and it won’t matter how good your case is – as the countless tax appeals have demonstrated, regardless of lapse reasons or potentially strained financial situations.
There are indeed a few critical terms in the aforementioned section to keep in mind. Firstly, it is the responsibility of the taxpayer to make “a full and true return,”. Failure to comply eliminates the four-year protection, granting Revenue the liberty to pursue you whenever it is found that your return was not fully and faithfully filed.
Likewise, if any inconsistencies arise due to possible fraud or negligence in any year’s return, the restrictiveness of the four-year period is no longer applicable to Revenue. You should also focus on the final segment: “ … the end of the taxable period during which the return was filed”.
Ordinarily, this won’t be problematic for those compliant with the regulations. However, if there’s a delay in filing your return or most crucially, if you and Revenue are in ongoing discussions concerning any modifications to the evaluation, the commencement of the four-year timeframe is contingent on the final return you file.
Of course, if a dispute arises over a filing, this could significantly surpass the standard four-year limit of the taxable period. As per your circumstances for the past two decades, you acknowledge that Revenue has not approached you with any queries or challenges regarding your returns. Consequently, unless there is a likelihood of something unsettling emerging, you are within your rights to discard the documents related to your returns for all periods following the complete passing of four years from the year you filed.