Key Takeaways
- Keep tax forms and supporting paperwork related to your income, expenses, home, and investments for at least three years after filing. After that, the statute of limitations for an IRS audit generally expires.
- The IRS can look back six or seven years if you fail to report income or claim a loss for a bad debt or worthless securities.
- Keep records on assets such as stocks, bonds, and your home until the statute of limitations expires for the tax year in which you sell them.
- Dispose of old tax documents securely by shredding them or using a shredding service.
If the IRS or the state tax agency where you live questions your tax deductions, credits, or business losses, you’ll need a copy of your tax return and related tax records to prove your return was accurate. But how long should you keep tax returns and related tax documents for this purpose?
Most people don’t need to hold on to tax returns and other tax records forever…but you should keep them around for a while. There are limits to how far back the government can go to look at previous tax returns, although exactly how far back depends on the situation. On the other hand, there may be reasons why you’ll want to hold on to tax records well past the IRS’s time limit. So, there’s no one-size-fits-all answer to questions about how long to keep tax returns and records.
What tax records and documents should you keep?
Before addressing the various recommended holding periods, let’s take a quick look at which tax records you ought to keep. You’ll want to keep a copy of your tax return itself. Beyond that, the best practice is generally to hold on to other tax forms and supporting paperwork related to your:
- Income (W-2s, 1099s, bank statements, etc.)
- Expenses and corresponding deductions (invoices, receipts, canceled checks, etc.)
- Home (closing statements, property tax assessments, home improvement receipts, etc.)
- Investments and retirement accounts (brokerage statements, 1099s, etc.)
How long you should keep each often depends on the statute of limitations that applies, which is covered in more detail below. The statutes of limitations in the U.S. tax code set time limits for the IRS to assess and collect taxes, or for a taxpayer seeking a refund or credit for an overpayment of taxes.
Basic rule: Keep tax returns and records for at least three years
The statute of limitations for the IRS to audit your return and assess taxes you owe is generally three years from the date you file your tax return. If you file your return before the due date (including any tax filing extensions), your return is treated as if it was filed on the due date.
To file an amended tax return to claim a refund or credit for taxes already paid, you generally have three years from the date you filed your original return, or two years from the date you paid any tax originally due, whichever is later.
Based on these two limitation periods, the IRS generally recommends keeping tax returns and any supporting documentation for at least three years after filing your return and/or paying your taxes. That way, if the IRS comes calling or you later discover a tax break that you missed, you’ll still have all the tax records you need.
TurboTax Tip:
If you have an efficient record-keeping system, it can make finding information a lot easier. The IRS has no particular standards or requirements for how you organize and file material, nor do state taxing authorities. Their only concern is that when they want to see a document, you're able to deliver it promptly.
When to keep tax documents for more than three years
In some cases, the statute of limitations for IRS assessments is longer than three years. If that’s the case, you’ll want to keep your tax documents and records until at least the expiration of the extended time limit.
For example, if you fail to report income that’s more than 25% of the gross income shown on your tax return, the IRS has six years to assess taxes on the unreported income. It also has six years to tax $5,000 or more of unreported income from foreign financial assets.
The deadline for claiming a refund or credit for a loss from a bad debt or worthless securities is 7 years. It’s 10 years for claiming the foreign tax credit.
If you don't file a tax return, there’s no statute of limitations for an IRS assessment of tax. So, if you don’t file one, you might want to keep your tax-related records indefinitely – just in case. Plus, if you did file a return, having a copy of it will help if the IRS says you didn’t file that year.
There’s also no statute of limitations for fraudulent returns. So, if you’re worried about the IRS claiming something on your return isn’t legitimate years later, keeping all your tax records will help you prove them wrong.
Keeping investment- or property-related tax records longer than the statute of limitations
It’s wise to keep records related to assets such as stocks, bonds, or even your house longer than the statute of limitations suggests.
For instance, if you own a home, you'll need a record of the purchase price and the cost of any improvements you've made to calculate any capital gains tax when you sell the home. If you claim depreciation on a rental property or business computer, you'll need records for that, too.
The IRS recommends hanging on to your files for assets until the statute of limitations expires for the year in which you sell or otherwise dispose of them. For example, if you sell stock this year, hold on to any documents relating to the stock for at least three years from the due date for filing this year’s federal income tax return.
If you have an IRA, 401(k), or other retirement account, keep related records for at least three years after you’ve withdrawn all the funds from the account.
Non-tax reasons to save tax returns and records
There might also be non-tax reasons for saving your tax returns and records beyond the statute of limitations. For example, you may want to keep W-2 forms until you retire in case the lifetime income used by the government to calculate your Social Security benefits isn’t right.
A previous year’s tax return might also be needed to apply for a mortgage or other loan, rent an apartment, obtain student financial aid, or receive government assistance. If you’re working with a financial planner, he or she may want to see your recent tax returns, too.
How long do you need to keep state tax returns and documents?
If you're paying state income taxes, the length of time you need to keep related records depends on state law.
Some states can look back further than the IRS to review old tax returns. California and Arizona, for example, generally apply a four-year statute of limitations for tax assessments. Montana has a five-year time limit. The time limit for a state tax audit may also be longer if you don’t report all your income or include false information on your return.
It’s best to check with the state tax agency where you live to get specifics.
How to dispose of old tax documents
Once the statute of limitations passes, you're likely ready to clear up some space. If you haven't already, you might want to upload your documents to the cloud before getting rid of them. That way, you always have them if you need to refer to them for any reason.
It's also important to note that your tax documents contain sensitive personal information, so it's best to dispose of them in the most secure way possible. Instead of simply throwing them away in the trash, shred them yourself, or use a shredding service.
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