How Long Do You Keep Receipts for Taxes?

Retaining tax receipts and financial records for the appropriate duration is crucial for personal financial management. Proper record-keeping helps verify income, deductions, and credits claimed on tax returns. It also provides documentation for tax authority inquiries.

Standard Retention Periods

Tax records should generally be kept for three years from the date you filed your original return or two years from the date the tax was paid, whichever is later. This period aligns with the standard statute of limitations for tax assessment. Most income and expense records, such as W-2 forms, 1099 forms, and receipts for common deductions, fall under this retention period.

Some situations extend this standard period. If unreported income is more than 25% of the gross income shown on your return, the retention period extends to six years. This allows tax authorities to assess tax on understated income. Employers must keep employment tax records, such as payroll records and Forms W-2 and W-4, for at least four years after the tax becomes due or is paid, whichever is later.

Records should be kept indefinitely in certain circumstances. This applies if you filed a fraudulent return or did not file a return. Without a filed return or in cases of fraud, there is no statute of limitations for tax assessment. Keeping these records provides documentation if such issues arise later.

Specific Circumstances for Longer Retention

Beyond standard periods, some financial records require longer retention due to their nature or long-term tax implications. Records for property, such as a home, stocks, or other investments, should be kept until the period of limitations expires for the tax year you dispose of the property. This includes documentation proving the original cost, improvements, and other adjustments to the property’s basis, essential for calculating gain or loss upon sale. If property was received in a non-taxable exchange, records of the old property must also be kept until the new property is disposed of.

Records related to non-deductible IRA contributions require indefinite retention. Copies of IRS Form 8606, reporting these contributions, should be kept permanently. These contributions establish a cost basis that will not be taxed upon distribution. Without proof, the entire distribution could be considered taxable, and the burden of proof rests with the taxpayer.

If you claim a deduction for a loss from worthless securities or a bad debt, keep supporting records for seven years. This allows for potential adjustments or inquiries. Documents supporting carryovers, such as net operating losses, capital loss carryovers, passive activity losses, or charitable contribution carryovers, should be retained until the year the carryover is fully utilized, plus the standard three-year period. These records substantiate the carryover’s calculation and application in future tax years.

Essential Records to Keep

Various documents serve as “receipts for taxes” and are important for accurate reporting. Income records include Forms W-2 from employers, various Forms 1099 (such as 1099-INT for interest, 1099-DIV for dividends, and 1099-NEC for nonemployee compensation), and Schedules K-1 from partnerships or S corporations. Bank statements showing interest or dividends received, and detailed records of self-employment income, account for all taxable earnings.

For deductions and credits, keep receipts and supporting documentation for itemized deductions, such as medical expenses, charitable contributions, and state and local taxes paid. Business expenses for self-employed individuals, education expenses, and dependent care expenses also require detailed records. Documentation substantiating eligibility for tax credits, like the child tax credit or education credits, should also be retained.

Asset records, including purchase and sale documents for homes, vehicles, and investments like stocks or mutual funds, establish cost basis and selling price. Bank and credit card statements can corroborate income and expense records. Copies of prior year tax returns and their supporting worksheets are references for preparing future returns and for tax authority inquiries.

Maintaining and Storing Your Records

Organizing and storing tax records accessibly is as important as knowing retention periods. For physical documents, using folders, file cabinets, or secure boxes organized by tax year and category streamlines retrieval. This approach ensures documents can be located quickly for an audit or future tax preparation.

Digital storage offers a convenient alternative. Scanning paper documents and saving electronic copies, such as PDFs or spreadsheets, reduces physical clutter. When storing digital records, use secure and redundant storage methods, such as cloud services, external hard drives, or USB drives, and regularly back up files to prevent data loss. The tax authority accepts legible digital copies.

Regardless of the storage method, accessibility is paramount in case of an audit or when needing information for future tax years. It is also important to protect sensitive personal and financial information in these records through secure storage practices, whether physical or digital. Establishing a consistent record-keeping system throughout the year, rather than organizing everything at tax time, simplifies the process.