Tax records should be kept on a year-round basis, not hastily assembled just for your annual tax appointment. Without tax records, you can lose valuable deductions by forgetting them on your tax return, or you may have unsubstantiated items disallowed if you are audited.
Generally, returns can be audited for up to three years after filing. However, the IRS may audit for up to seven years if there is substantial unreported income. The three and seven year limits start with the filing of a tax return; if no return is filed, there is no time limit for an IRS audit!