How Long to Keep Tax Returns and Records?

Maintaining accurate tax records is a key responsibility for taxpayers. Understanding the appropriate retention periods for these documents is crucial for responsible financial management. This knowledge helps individuals and businesses navigate potential inquiries from tax authorities and provides information for future financial planning.

Standard Retention Periods

The most common retention period for tax records is three years. This period 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 15, 2025, the three-year period extends until April 15, 2028. This timeframe aligns with the Internal Revenue Service’s (IRS) statute of limitations for auditing your return and assessing additional taxes, as outlined in Internal Revenue Code (IRC) Section 6501.

This three-year rule covers most individual taxpayers and small businesses, provided their returns are filed accurately and on time.

Situations Requiring Longer Retention

While the three-year rule applies broadly, several scenarios require keeping tax records for extended durations. If there is a substantial understatement of income, defined as omitting more than 25% of your gross income, the IRS’s audit period extends to six years. This six-year rule allows the IRS more time to address significant reporting discrepancies.

Records for claims related to a loss from worthless securities or a bad debt deduction should be kept for seven years. Additionally, some records should be kept indefinitely. These include records for tax years where no return was filed, a fraudulent return was submitted, or for records that establish the basis of property (e.g., a home purchase or stock transactions). Indefinite retention periods apply because the statute of limitations does not apply in cases of unfiled or fraudulent returns, and basis records are crucial for calculating future gains or losses upon sale.

Important Supporting Documents

Maintaining the tax return itself is only part of comprehensive record-keeping; supporting documents are also important. These documents provide evidence to substantiate the income, deductions, and credits reported on your return. Key income documents include W-2 forms from employers, 1099 forms for various types of income such as interest, dividends, retirement distributions, and freelance earnings, and K-1s for partnership or trust income.

Records supporting deductions and credits are also essential. This includes receipts for charitable contributions, medical expenses, and business-related costs. Bank statements, canceled checks, and brokerage statements help verify transactions and the cost basis of investments. For property owners, documents related to home improvements, purchase and sale agreements, and property tax assessments are necessary to determine basis and calculate capital gains or losses when the property is eventually sold.

Secure Storage and Disposal

Proper storage of tax records is important to protect sensitive financial information from loss, damage, or identity theft. Both physical and digital storage methods offer secure options. For physical documents, a fireproof and waterproof safe or a secure filing cabinet in your home is advisable. Organizing these documents by tax year can facilitate easy retrieval.

Digital storage provides convenience and can be highly secure when implemented correctly. Scanning physical documents to create digital copies, using encrypted hard drives, or leveraging secure cloud storage services with strong authentication are effective strategies. Regular backups of digital records to an external drive or a separate cloud service are important to prevent data loss. When the retention period for records has passed, secure disposal is important to prevent identity theft. Paper documents containing sensitive information should be shredded using a cross-cut shredder, while digital files should be securely deleted or the storage device physically destroyed.

Obtaining Copies of Past Records

If original tax records are lost or destroyed, taxpayers can generally obtain copies of past tax returns or transcripts from the IRS. The fastest way to access tax records is through the IRS’s online “Get Transcript” service, which allows individuals to view, print, or download various types of transcripts, including tax return transcripts, tax account transcripts, and wage and income transcripts. These transcripts typically show most line items from the original return but may mask some personally identifiable information for security.

For those who prefer not to use online services, transcripts can be requested by mail using Form 4506-T, “Request for Transcript of Tax Return,” or by phone. If an exact copy of the filed tax return, including all attachments, is needed, taxpayers must submit Form 4506, “Request for Copy of Tax Return.” There is a fee for each copy requested using Form 4506, and processing can take several weeks. Additionally, tax preparers or tax software providers may retain copies of past returns, offering another potential source for retrieval.