How Long Should I Keep Income Tax Records?

Taxpayers often wonder how long they should keep their income tax records. Maintaining accurate tax records is important for financial integrity and potential verification by tax authorities. The necessary retention period for these documents can vary significantly depending on the specific circumstances and the type of record involved.

The Standard Three-Year Retention Period

For most taxpayers, the standard record retention period for income tax documents is three years. This period generally begins from the date you filed your original tax return or the due date of the return, whichever date is later. For example, a 2024 tax return filed on April 15, 2025, would typically expire on April 15, 2028.

This three-year timeframe aligns with the Internal Revenue Service’s (IRS) statute of limitations for assessing additional tax. Under 26 U.S. Code § 6501, the IRS generally has three years from your filing date to audit your return and assess any additional taxes you might owe. Common records covered by this rule include W-2 forms, 1099 forms, and receipts for typical deductions or credits claimed on your return. Keeping these documents provides necessary support if your return is selected for examination.

Extended Retention Periods for Specific Situations

While three years is common, some situations require longer record retention. A six-year retention period applies if you substantially understate your gross income. This occurs when you omit more than 25% of your gross income from your tax return.

This extended period is stipulated under 26 U.S. Code § 6501, allowing the IRS more time to assess tax in cases of significant income omissions. For instance, if you claim a deduction for a bad debt or a loss from worthless securities, you should keep related records for seven years. This longer period accounts for the time it might take for a debt or security to become uncollectible or worthless, allowing for a claim in a later tax year.

If you are an employer, including those with household employees, employment tax records generally need to be retained for at least four years. This period starts from the date the tax became due or was paid, whichever is later. These records include information on wages, tips, employee details, and tax deposits, important for verifying payroll tax compliance.

Records to Keep Indefinitely or Until Sale of Property

In some instances, tax records should be kept indefinitely. If a fraudulent return was filed or if no return was filed at all, there is no statute of limitations for the IRS to assess tax. This means the IRS can investigate and assess taxes for these years at any time, making indefinite record retention important. These rules are outlined in 26 U.S. Code § 6501.

Records related to the basis of property, such as real estate, stocks, or other investments, also require long-term retention. These documents should be kept for as long as you own the property and for at least three years after you sell or dispose of it. These records are important for accurately calculating any taxable gain or deductible loss when the property is sold. Records of the original purchase price, closing statements, and capital improvement receipts directly affect the calculated basis, impacting your tax liability.