How Many Years of W2 Should You Keep?

Each year, employers issue a Form W-2, the Wage and Tax Statement, detailing your total annual wages and the corresponding taxes withheld. This document is a fundamental component of filing your annual income tax returns, serving as the primary record of your earnings and tax payments for a given year.

The IRS Statute of Limitations

The most direct reason to keep your W-2s relates to the Internal Revenue Service (IRS) and its authority to review your tax filings. The length of time the IRS has to initiate an audit is known as the statute of limitations, and this period dictates the minimum time you should hold onto your tax documents. For the majority of taxpayers, this period is three years from the date you filed your tax return or the return’s due date, whichever is later.

This timeframe extends under specific circumstances. If you have substantially underreported your gross income by more than 25%, the IRS has six years to conduct an audit. For example, if your return showed $60,000 in gross income but the actual amount was $85,000, you would fall into this category.

In more serious cases, the statute of limitations may never expire. If you file a fraudulent return or fail to file a return at all, the IRS can assess taxes and penalties at any point in the future. A conservative approach is to keep your W-2s for at least seven years, which covers the six-year period for substantial underreporting and aligns with requirements for certain financial loss deductions.

Social Security Earnings Verification

Beyond tax audits, your W-2 plays a direct role in your future financial security. The Social Security Administration (SSA) uses the wage information reported on your W-2 to calculate your future retirement, disability, and survivor benefits. The earnings recorded by the SSA determine the amount of benefits you or your family will eventually receive, so it is important that your earnings history is accurate.

To verify this, you should create a “my Social Security” account on the SSA’s official website. This online portal allows you to view your complete earnings record as tracked by the administration. It is a good practice to periodically review this statement and compare the earnings listed for each year against the amounts shown on your W-2 forms.

If you discover a discrepancy between your W-2 and your SSA earnings record, your W-2 is the primary document you will need to request a correction. For this reason, you should keep each year’s W-2 until you have confirmed that the income has been correctly posted to your SSA record. Once the information is verified, the immediate need for that specific W-2 for Social Security purposes diminishes.

Other Financial and Personal Uses

Your W-2s serve as official proof of income for many significant financial transactions. When you apply for a mortgage or seek to refinance an existing home loan, lenders almost always require copies of your W-2s for the most recent two years. This helps them verify your employment and income stability, and without these documents, the loan application process can be delayed or even denied.

The need for W-2s extends to other common financial situations. Landlords and property management companies frequently request W-2s as part of the application process for renting an apartment or house. Similarly, when applying for educational financial aid, such as federal student loans or grants, you will likely need to provide your W-2 information on the Free Application for Federal Student Aid (FAFSA).

Storing and Disposing of W-2s

For physical copies, it is best to use a system that protects them from damage and unauthorized access. Storing them in a fireproof and waterproof safe or a locked filing cabinet is a reliable method. This ensures the documents are preserved and that the sensitive information they contain, like your Social Security number, is kept private.

If you receive your W-2 electronically or choose to scan your paper copies, protect the digital files. Save them on a password-protected computer and consider creating a backup on an encrypted external hard drive or a secure cloud storage service. Using strong, unique passwords and enabling multi-factor authentication on cloud accounts adds a significant layer of security.

Once you have determined a W-2 is no longer needed, you must dispose of it properly to prevent identity theft. Because the form contains sensitive personal information, the recommended method for paper copies is a cross-cut shredder. For digital files, use a digital file shredding software to permanently erase the data.