How Many Years of Tax Returns Do I Need to Save?

Maintaining accurate tax records is a fundamental aspect of financial management and tax compliance. Knowing how long to keep these documents can prevent issues during audits, assist with future tax filings, and support financial claims. The duration for which records should be retained varies based on the type of document and the nature of the financial activity it supports. Understanding these retention periods helps individuals and businesses avoid potential penalties and ensures they have the necessary information readily available.

The Standard Retention Period

The most common recommendation for keeping tax records is three years. This period aligns with the Internal Revenue Service’s (IRS) general statute of limitations for assessing additional tax. The three-year window begins from the date you filed your original 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 IRS generally has until April 15, 2028, to initiate an audit.

If you file an amended return to claim a credit or refund, the retention period is three years from the date you filed the original return or two years from the date you paid the tax, whichever is later. Keeping copies of your filed tax returns is advised for preparing future returns and making computations for amended returns.

Situations Requiring Longer Retention

Certain financial situations necessitate keeping tax records for longer than the standard three-year period. One such scenario involves underreported income. If you do not report income that should have been included on your return, and this unreported amount is more than 25% of the gross income shown on your return, the IRS has six years to assess additional tax. Records supporting income should be retained for six years.

Claims for a loss from worthless securities or bad debt deductions extend the retention period to seven years. This longer timeframe allows for the substantiation of such deductions if reviewed by the tax authorities. Worthless securities include investments that have lost all market value, and bad debt refers to money owed that cannot be collected despite reasonable efforts.

Unfiled tax returns or those filed fraudulently have no statute of limitations for civil tax fraud. While the IRS focuses on the last six years for unfiled returns, the legal authority to go back further remains.

Records related to the basis of property, such as a home or investments, require retention until a specific point after the property is sold. You should keep these records until the period of limitations expires for the year in which you dispose of the property. This documentation is important for calculating any depreciation, amortization, or depletion deductions, and for determining the gain or loss when the property is sold. If property was received in a non-taxable exchange, records for both the old and new property should be kept until the statute of limitations expires for the year the new property is disposed of.

For businesses, employment tax records must be retained for at least four years after the date the tax becomes due or is paid, whichever is later. These records include information about employee wages, tips, withholding certificates, and tax deposits.

Key Supporting Documents

Beyond the tax returns themselves, various supporting documents are important for substantiating the information reported. These documents provide proof of income, deductions, credits, and asset basis, which are all important in case of an audit.

Income statements, such as Forms W-2 from employers and Forms 1099 from various payers (e.g., 1099-INT for interest, 1099-DIV for dividends, 1099-NEC for independent contractor income), are important. Records for deductions and credits are equally important. This includes receipts for charitable contributions, medical expenses, and business expenses. For instance, receipts, canceled checks, or credit card statements can verify expenses claimed.

Documentation related to investments, such as brokerage statements and K-1s, should be kept to track purchase prices, sales prices, and commissions, which are necessary for calculating capital gains or losses. Documents related to asset purchases and sales, particularly for real estate, are also important. These include closing statements, purchase and sales contracts, and records of home improvements. These records help establish the cost basis of the property, which is used to determine taxable gain or loss upon sale.

Accessing Prior Tax Records

If you find yourself without copies of prior tax returns or need official tax information, several avenues are available for obtaining them. The IRS provides various types of transcripts free of charge, which summarize key information from your tax returns.

A tax return transcript shows most line items from your original tax return, including adjusted gross income (AGI), while a tax account transcript provides detailed information about your tax account, including payments and adjustments made after filing. You can request these transcripts online through the IRS website, by phone, or by mail. Online requests allow immediate download, while phone and mail requests take 5 to 10 business days to be delivered to the address on file with the IRS. To obtain an exact copy of a previously filed tax return, including all attachments, you can submit Form 4506, “Request for Copy of Tax Return,” though a fee is associated with this service and processing can take up to 75 days.

For state tax returns, you need to contact your specific state’s department of revenue. Many state tax agencies offer online services or specific forms for requesting copies of past returns or transcripts. Additionally, tax preparers or tax software providers often retain copies of returns they prepared, which can be another source for retrieving your records.