How Many Years Do You Need to Keep Tax Returns?

Keeping accurate tax records is an important aspect of financial management for individuals and businesses alike. These documents serve as proof of income, deductions, and credits reported to tax authorities, providing a reference for future planning and potential audits. Proper recordkeeping helps ensure compliance with tax laws and can simplify the process of preparing future returns.

Standard Retention Period

The general guideline for retaining tax returns and supporting documents is three years. This period begins from the date you filed your original return or the due date, whichever is later. For instance, if you filed your 2024 tax return on April 15, 2025, the three-year period typically extends until April 15, 2028.

This three-year timeframe aligns with the Internal Revenue Service’s (IRS) statute of limitations for most audits. The IRS has three years to assess additional tax from the later of the filing date or the due date. This period covers the vast majority of tax situations, allowing taxpayers to dispose of records once this window closes, provided no exceptions apply.

Specific Situations Requiring Longer Retention

While the three-year rule applies broadly, some situations require keeping tax records for extended periods. For a substantial omission of income, the retention period extends to six years. This applies if you omit more than 25% of your gross income shown on your return, or if you fail to report at least $5,000 of income from foreign financial assets.

A seven-year retention period is required if you file a claim for a loss from worthless securities or a deduction for a bad debt. Records related to property, such as a home or investments, should be kept until three years after you dispose of the property. This accounts for the standard audit period following the sale.

For unfiled or fraudulent tax returns, there is no statute of limitations, so records should be kept indefinitely. This ensures you can always substantiate your financial history if questioned by tax authorities.

Keeping Supporting Documentation

All supporting documentation that validates the information on your return must be retained. These documents are crucial for substantiating reported income, deductions, and credits, serving as proof in case of an audit or inquiry from tax authorities.

Examples of essential supporting documents include W-2 forms, 1099 forms for income like interest, dividends, or self-employment earnings, and 1098 forms for mortgage interest. Receipts for deductions, such as charitable contributions, medical expenses, or business expenditures, should be kept. Bank statements, canceled checks, and mileage logs are important to support financial transactions and claimed expenses. These records should be held for the same duration as the tax return they relate to, ensuring a complete record for each tax year.

Safely Disposing of Records

Once the required retention period for your tax records has passed, dispose of them securely. This step protects your personal and financial information from identity theft and fraud. Simply throwing documents in the trash can expose sensitive details to unauthorized individuals.

Recommended methods for secure disposal include shredding, burning, or utilizing secure document destruction services. Shredding documents containing account numbers, Social Security numbers, or other identifying information is a primary safeguard. Professional shredding services offer a reliable way to ensure complete destruction of sensitive papers. This proactive approach helps prevent your information from falling into the wrong hands.