How Long Should You Keep Tax Returns?

Keeping accurate tax records is an important part of managing personal finances. These records serve as documentation for the income reported, deductions claimed, and credits received on tax returns. Maintaining proper records allows individuals to substantiate their tax filings, respond to inquiries from tax authorities, and amend returns if necessary.

Understanding Standard Tax Record Retention

For most individuals, the general guideline for retaining tax returns and supporting documents is three years. This period aligns with the Internal Revenue Service’s (IRS) statute of limitations for auditing a return and assessing additional tax. The three-year period begins from the date the original return was filed, or the due date of the return, whichever is later. For instance, if a tax return for the 2024 tax year was filed on April 15, 2025, the IRS has until April 15, 2028, to initiate an audit for that year.

This three-year window also applies when a taxpayer needs to file an amended return to claim a refund or credit for taxes already paid. The timeframe for claiming a refund is three years from the date the original return was filed, or two years from the date the tax was paid, whichever is later. Keeping records for this minimum period is important for potential IRS inquiries and to make adjustments or claim benefits.

When to Keep Records Longer

While the three-year rule is a common guideline, several situations require taxpayers to retain their records for an extended period. One such scenario involves a substantial omission of income. If more than 25% of the gross income that should have been reported is not included on a tax return, the IRS has six years from the filing date to assess additional tax. This extended period applies whether the omission was intentional or an oversight.

Records should also be kept for seven years if a claim for a loss from worthless securities or a bad debt deduction was filed. The longer retention period ensures taxpayers have documentation to support their claims. In cases where a tax return was never filed, or if a fraudulent return was submitted, there is no statute of limitations, meaning records should be kept indefinitely.

Records related to property, such as a home, investments, or other assets, should be maintained for as long as the property is owned, plus an additional three years after its disposition. These documents are necessary to calculate depreciation, amortization, or depletion deductions, and to determine any gain or loss when the property is sold. For employment tax records, businesses must keep them for at least four years from the date the tax became due or was paid, whichever is later. This applies to documents such as payroll registers, tax returns, and withholding documentation.

Essential Supporting Documents to Retain

Beyond the tax return itself, supporting documents are important for substantiating the information reported. These include income statements such as W-2 forms from employers, and various 1099 forms (e.g., 1099-INT for interest, 1099-DIV for dividends, 1099-NEC for nonemployee compensation). K-1 forms from partnerships, S corporations, or trusts are also important for reporting income or losses from these entities.

Receipts and records for deductions and credits claimed on a tax return are equally important. This includes documentation for medical expenses, charitable contributions, business expenses, and educational costs.

Bank statements, canceled checks, and credit card statements that reflect tax-related transactions should also be kept as proof of payment and expenditure. Documents detailing the acquisition and disposition of assets, such as stock or real estate, are necessary to determine cost basis and calculate capital gains or losses. Proof of tax payments, like canceled checks for estimated taxes, should also be retained to confirm payments made to tax authorities.

Managing Your Tax Records: Storage and Secure Disposal

Once the appropriate retention period for tax records has been determined, establishing an effective management system is important. Records can be stored physically in file cabinets or boxes, or digitally as scanned documents. For physical records, using fireproof and waterproof containers or safes can protect against unforeseen damage. Organizing documents by tax year in clearly labeled folders helps ensure easy retrieval if they are needed.

For digital records, scanning physical documents and saving them in widely accepted formats like PDF is a common practice. Storing these files on secure cloud services or external hard drives, with regular backups, provides both accessibility and protection against data loss. The IRS accepts legible digital copies of records.

Once the required retention period has passed, secure disposal of sensitive tax documents is important to prevent identity theft. Physical documents should be shredded using a cross-cut shredder, or professional shredding services can be utilized for enhanced security. Digital files containing sensitive information should be securely deleted or wiped to ensure they cannot be recovered.