According to Old Doc White, for how many years should you keep your federal and state income tax records?

• A. Indefinitely
• B. Only 1 year
• C. Until you receive your refund
• D. At least 7 years

Answer: (D)

Verified step by step guidance

1. Understand the context of the question: The problem is asking about the recommended duration for retaining federal and state income tax records, which is a common financial accounting practice.
2. Recognize that tax record retention is important for compliance with tax laws and for addressing any potential audits or disputes with tax authorities.
3. Learn the general guideline: The IRS typically recommends keeping tax records for at least 7 years, as this covers the statute of limitations for most tax-related issues, including claims for refunds and audits.
4. Consider exceptions: In some cases, such as if you fail to file a return or file a fraudulent return, the IRS may require records to be kept indefinitely.
5. Apply this knowledge to the problem: The correct answer aligns with the general guideline of retaining tax records for at least 7 years, ensuring compliance and preparedness for any tax-related inquiries.