How Long Should You Keep Your W-2 Forms?

Form W-2, the Wage and Tax Statement, is a document from your employer detailing your annual earnings and the taxes withheld from your paycheck. Understanding the appropriate retention period for this form is important for tax compliance and prudent financial management. Keeping your W-2s for the correct length of time ensures you can verify income, amend past tax returns if needed, and substantiate your earnings for major financial applications.

IRS Retention Guidelines

The Internal Revenue Service (IRS) operates under a “period of limitations,” a timeframe during which it can audit a tax return or a taxpayer can file an amended return. The general guideline is to keep tax records, including Form W-2, for three years from the date you filed your original return or the due date of the return, whichever is later. This three-year window covers the most common period for an IRS review or for you to correct an oversight and claim a refund.

This timeframe extends under specific circumstances. The IRS recommends a six-year retention period if you have substantially underreported your gross income by omitting more than 25% of what should have been reported. The retention period is seven years if you file a claim for a loss from worthless securities or a bad debt deduction.

In more serious cases of non-compliance, the retention period becomes indefinite. If you file a fraudulent return, there is no statute of limitations for the IRS to take action. Similarly, if you fail to file a tax return for a particular year, you should keep your W-2s and other financial records for that year forever.

Other Agencies and Financial Needs

Beyond federal tax obligations, your W-2 forms are needed to verify your earnings history with the Social Security Administration (SSA). The SSA uses your reported earnings to calculate your future retirement or disability benefits. You should keep your W-2s at least until you have verified that your earnings have been correctly posted to your Social Security statement, which you can check online.

State and local tax agencies also have their own rules and statutes of limitations, which may require you to keep tax documents longer than the IRS. These periods can vary, so it is a good practice to check the specific requirements for the revenue departments in the jurisdictions where you are required to file.

Your W-2s also serve as proof of income for major financial transactions. When you apply for a mortgage, a car loan, or a business loan, lenders will require copies of your W-2s for the past two or more years to verify your employment and income stability. Having organized access to these forms can streamline the application process.

Secure Storage and Disposal

Properly storing your W-2s is necessary to protect the sensitive information they contain, such as your Social Security number. For physical copies, a fireproof safe or a locked filing cabinet offers protection against theft, damage, or loss.

For digital storage, you can scan your paper W-2s and save them as encrypted files on a computer, an external hard drive, or a secure cloud storage service. Using strong passwords and enabling two-factor authentication for cloud accounts adds a layer of protection against unauthorized access.

Once the retention period for your W-2s has passed, you must dispose of them securely to prevent identity theft. For paper documents, use a cross-cut shredder, which turns documents into small pieces that are difficult to reassemble. For digital files, use a file-shredding software program to permanently erase the data from your hard drive, as simply deleting them is not always enough.