How Many Years of Tax Returns Should You Keep?

Taxpayers often wonder how long to keep tax returns and related documents. The specific duration for retaining these records depends on various factors and individual circumstances. Understanding these requirements helps ensure compliance and provides necessary documentation.

IRS Review Periods

The Internal Revenue Service (IRS) has a defined period, known as the statute of limitations, during which it can review a tax return and assess additional tax. This period is generally three years from the date you filed your original return or the due date, whichever is later. This three-year period extends to six years if you substantially understate your gross income by more than 25% on your return.

There is no statute of limitations if you file a fraudulent return or completely fail to file a tax return. In these cases, the IRS can pursue collection or assessment actions at any time.

Record Retention Guidelines

Beyond the IRS’s review periods, taxpayers have practical reasons to retain their tax returns and supporting documents for longer durations. A common recommendation is to keep records for three years from the date you filed your original return. This aligns with the standard IRS audit period, providing documentation if your return is reviewed.

If you need to file a claim for a credit or refund, you must do so within three years from the date you filed your original return or two years from the date you paid the tax, whichever is later. Records related to bad debt deductions or worthless securities should be kept for seven years.

For records concerning property, such as a home, investments, or retirement accounts, it is advisable to keep them indefinitely. These documents establish your cost basis, which is important for calculating gains or losses when you sell the asset. Maintaining supporting documents, including W-2s, 1099s, and receipts for deductions, is important as they substantiate the information reported on your tax returns.

Amending Past Returns

Taxpayers can correct information on a previously submitted tax return by filing an amended return, typically using Form 1040-X. This ability is subject to specific time limits.

You must file Form 1040-X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later. This timeframe allows individuals to correct errors or omissions that may impact their tax liability or refund. Common reasons for amending a return include overlooked deductions, missed tax credits, or receiving corrected income statements after filing.

Common Situations Requiring Past Returns

Beyond interactions with tax authorities, various everyday situations often require individuals to provide copies of their past tax returns. These requests typically come from third parties who need to verify income or financial stability.

When applying for a mortgage or other loans, lenders frequently request two to three years of tax returns to assess your financial history and repayment capacity. Student financial aid applications, such as the Free Application for Federal Student Aid (FAFSA), also require tax information to determine eligibility for grants and loans. Landlords may ask for tax returns to confirm income and ability to pay rent. Government benefits or social programs may also require tax returns as part of their application process.