How long do you have to keep paper records of your bills for tax purposes?

There are three general tax-record deadlines that you should be aware of before you start discarding or filing your tax-related records:

The Internal Revenue Service can audit any taxpayer's returns for three years from the date the return was filed. The audit may be random or may be due to specific red flags. Keep all tax records that document any deductions you took, income claimed or other information used to calculate your return.
If the Internal Revenue Service believes you have underreported gross income by more than 25%, they have six years to challenge your return.
The Internal Revenue Service has an indefinite time limit on those who fail to file a return or who fraudulently file a return.
In view of these time limits, you should have a good idea which one can apply to you. Now let's see what records should be kept and which can be discarded.

Tax Returns. You should keep returns indefinitely. They can provide excellent documentation for planning your financial future. Other than that, there is no legal reason to retain these for longer than the three-year or six-year period.
Supporting Documents. Keep for six years your supporting records. These may include W-2 forms, 1099s, cancelled checks or receipts for charitable contributions and child care, mortgage interest statements, alimony payments or receipts, retirement plan contributions and withdrawals, receipts for medical expenses, professional dues and any other documentation that relate to items declared on your return. You may know you did not underreport income, but should the IRS audit, you have records to prove it. It is especially important for the self-employed individuals since their income may not be as easily documented as an employee's.
Housing Records. Keep records relating to home improvements, additions, expenses involved in selling and buying a home for at least as long as you own a home plus six years. IRS Form 2119 for reporting the sale or exchange of a home and the purchase of a new one should also be retained. This pile of papers will show improvements you make or sale expenses added to the cost basis (usually the original purchase price) of your home. When you sell your home, the higher the adjusted cost basis, the smaller the capital gain or profit.
Investment Records. Retain all records that document purchases and reinvestment for six years after the sale of the investment. You may get rid of the monthly statements once you receive an annual statement that reflects the yearly activity.
IRA Contributions. Records of nondeductible contributions to your IRA account should be kept indefinitely. These records would prove your amounts on Form 8606. When you withdraw these contributions in later years you will have the documentation to prove the tax has been paid.