How Long To Keep Tax Returns: A Complete Guide

After filing your taxes, your first instinct may be to put your paperwork in a folder and store it away forever. You should hold on to certain documents, but you may be able to declutter more than you originally assumed was possible.

In traditional cases, you’re likely safe to toss out your returns if 3 years or more have passed since you filed your taxes. However, your personal tax situation will determine exactly how long you should keep your tax returns. Let’s explore a few tax scenarios and how long you should keep your returns if these scenarios apply to you.

How Long Do You Need To Keep Tax Returns?

The Internal Revenue Service (IRS) generally recommends keeping tax returns for at least 3 years from the date you filed them, but longer under certain circumstances.

When To Keep Returns For 3 Years

The IRS’ statute of limitations for auditing your returns is 3 years from the date you file your taxes. You can also claim tax credits and refunds for up to 3 years after you file, or 2 years after you pay the tax – whichever is later.

If you do request a tax refund or credit after filing, keep records in your possession for 3 years from the original file date. If you paid your tax bill at a later date, hold on to your returns for 2 years post-payment.

If you realize you made a mistake and need to file an amended return, the period of limitation is also 3 years. To file an amended return, you’ll need to submit copies of the documents you’re amending.

When To Keep Returns For 4 Years

If you have employment tax records, you should tuck them away for at least 4 years after the tax is due or paid, whichever date is later.

When To Keep Returns For 6 Years

In cases where you have unreported income that you should’ve reported on Tax Form 1040 for a specific tax year, keep return records for 6 years. The IRS’ allotted time to audit your returns doubles to 6 years if you didn’t report more than 25% of your earnings.

When To Keep Returns For 7 Years

In the unfortunate event that a stock you own loses all value, you may claim a worthless securities deduction. In this case, you should keep your tax return for 7 years after filing.

If someone owes you or your business money you’re unable to collect, you may be able to claim a bad debt deduction. If you have to claim this deduction, hold on to your return for 7 years from the date you filed.

When To Keep Records Indefinitely

If you don’t file a tax return at all, you’ll need documentation to support why you didn’t. For instance, if your income fell short of the requirement to file, you should always have a record stating this. With such information readily available, you may be able to prevent the IRS from conducting an in-depth examination of the year you didn’t file.

If you buy real estate, you should always set aside returns from that tax year to maintain a record of the purchase.

The IRS has no time limit on when it can audit you. The IRS may perform an audit at any time if it suspects someone filed taxes with inaccurate or illegal information.

Tax Records Worth Keeping

Along with your tax returns, you should keep some additional tax records for a reasonable period of time. Examples of supporting documentation to hold on to include:

• Income records: Keep your W-2s, 1099 forms and any other documents containing income information for the corresponding tax return.
• Expenses and deduction records: Hang on to invoices, business expense receipts,  charitable donation receipts and other necessary documents if you itemize tax deductions when you file.
• Property records: As mentioned, it’s best to always keep tax returns from the year you purchased property. In addition to your return, keep any property tax assessments, closing statements and purchase records.
• Retirement account and other investment records: If you contribute to a retirement account, be sure to hold on to the associated statements, forms and distribution records. If you have other investments, keep those statements at your disposal as well.

Tips For Storing Your Tax Records

• Consider digital record-keeping. Digital files may enable you to keep a longer-running tax history, without physical clutter. You may also be able to search and sort through your records more easily, without rummaging through paperwork. Some tax preparation companies have even made the switch to only sending electronic tax forms. If you’re uneasy about going fully digital, you could back up your hard copies with e-files.
• Stay organized. If you keep returns for 3 years or more, you’ll likely end up with a few returns at a time. To keep your records in order, separate them by tax year. Categorizing your records within each year can also be helpful for you and your tax preparer.
• When in doubt, grab a photo. Before you dispose of any tax records, you may want to take a digital photo of them to be on the safe side. Just because the IRS no longer needs access to these records doesn’t mean you won’t need them for other purposes.

The Bottom Line

Once again, you should plan on keeping your tax returns in your arsenal for at least 3 years. In some cases, you’ll be wise to hold on to them for longer – or even forever. Use discretion as you determine whether you’re safe to toss out your returns. Your tax forms contain sensitive information, so exhibit caution when you get rid of them.

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