How Long Should You Keep Your Tax Records?

Tax records provide proof of income, deductions, and credits reported on your tax returns. Maintaining these documents allows you to accurately respond to inquiries or potential audits from the Internal Revenue Service (IRS) or state tax departments. Proper documentation helps prevent disputes and demonstrates compliance with tax laws.

Standard Record Retention Period

For most taxpayers, the standard record retention period is three years. This timeframe begins from the date you filed your original tax return or the due date of the return, whichever is later. For instance, if you filed your 2024 tax return on April 10, 2025, the three-year period would start on April 15, 2025, meaning records should be kept until April 15, 2028. If you filed on extension, the period begins on the date the extended return was filed.

This period aligns with the general statute of limitations for the IRS to assess additional tax. This statute of limitations refers to the timeframe within which the IRS can audit your return and assess any additional tax you may owe. This three-year rule also applies if you need to file an amended return to claim a refund or credit. In such cases, you have three years from the date you filed your original return or two years from the date you paid the tax, whichever is later, to file a claim.

Situations Requiring Extended Retention

Some situations require taxpayers to keep records for longer than the standard three-year period. For example, if you understate your gross income by more than 25% of the amount reported, the statute of limitations for the IRS to assess additional tax extends to six years from the filing date. This six-year rule also applies if you do not report income from foreign financial assets exceeding $5,000.

A seven-year retention period applies to records related to claims for a loss from worthless securities or bad debt deductions. This extended period provides sufficient time to support these specific deductions. Maintaining comprehensive documentation, such as financial statements or bankruptcy filings for worthless securities, helps substantiate your claim.

Certain circumstances require indefinite retention of tax records. If you file a fraudulent return or fail to file a return, there is no statute of limitations for the IRS to assess tax. In these cases, keep all tax and supporting documents indefinitely.

Records related to the basis of property, such as real estate, stocks, or other assets, should be kept until the statute of limitations expires for the year you dispose of the property. These records are used to figure depreciation, amortization, or depletion deductions, and to calculate any gain or loss when you sell the property. For example, if you received property in a non-taxable exchange, keep records of both the old and new property until the period of limitations expires for the year you dispose of the new property.

Household employers must keep employment tax records for at least four years after the tax becomes due or is paid, whichever is later. This includes records like wage payments, employee names, Social Security numbers, and copies of Forms W-2 and W-3. Some employment tax records, such as those related to qualified sick leave wages or employee retention credits, may require retention for at least six years.

Essential Tax Documents to Keep

Retaining a variety of documents is important for accurate tax reporting and for substantiating claims made on your return.

• Your filed federal and state tax returns are foundational documents, providing a summary of your financial information. These copies are helpful for preparing future tax returns and making calculations if an amended return is needed.
• Income statements include W-2 forms from employers, 1099 forms (such as 1099-INT for interest, 1099-DIV for dividends, 1099-MISC for miscellaneous income, or 1099-NEC for nonemployee compensation), and K-1 forms from partnerships or S corporations. These documents verify the income amounts reported on your return.
• Records supporting deductions and credits include receipts for charitable contributions, medical expense invoices, and documentation for business expenses. Additionally, statements like Form 1098 for mortgage interest, student loan interest statements, and property tax bills provide proof for specific deductions.
• Investment records, such as brokerage statements and purchase or sale confirmations for stocks, bonds, or mutual funds, are necessary to track gains and losses.
• For property, documents like purchase agreements, closing statements, and receipts for significant home improvements help establish the cost basis, which affects gain or loss calculations upon sale.
• Finally, bank statements and canceled checks serve as proof of payment for various transactions and can support entries on your tax return.

Organizing and Storing Your Records

Establishing an effective organization and storage system is the next step. One common method is physical storage, using filing cabinets or secure boxes. Labeling files clearly by tax year simplifies retrieval. Each year’s tax file should contain all relevant income statements, deduction receipts, and the filed tax return.

Digital storage offers another practical approach. You can scan physical documents to create legible electronic images. These digital files can be stored on cloud services, external hard drives, or secure personal computers. Regardless of the method, implementing strong security measures, such as password protection for digital files and physical locks for paper documents, is advisable.

Regularly backing up digital tax records helps prevent data loss. For both physical and digital records, ensure accessibility by knowing where documents are stored and having a clear retrieval system. A practical tip is to create a dedicated tax file for each year and immediately place new documents into it as they are received, rather than waiting until tax season.