Keep a file of your income tax return for at least three years after filing
It will take about 3 years for the IRS to complete an audit of your income tax thus it is important to keep all the paper works with you should you need to be questioned for verification. These documents include the W-2 forms, 1099 forms, receipts, cancelled checks of at least three years after filing. For instance, if you have filed in 2007 for the tax year of 2006, then you ought to keep a record of your documents until 2010.
To be safe, you may also want to keep your records for up to six years. The IRS audit is possible within a six year time frame and it is important that you have the necessary papers that will back you up as an honest tax payer.
Moreover, you also need to keep any record of your purchases for items that can be used in capital gains like bonds, stocks and real estate properties. Once you are audited, make sure that you cab show your taxable gain or loss and if you have rolled-over gains, then you should also keep a record of the sale that has been made on your property.