How Long Should You Keep Your Tax Documents?

April 2, 2024

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It is the age-old question: how long should you keep tax documents? Many taxpayers are afraid to discard any tax returns, and the “stack” grows taller and taller each year (or adds to the long list of files on your computer).

Taxpayers must be able to store and retrieve important records to convert to hard copies when documents must be produced. Here is some advice to keep in mind when going through your old tax documents.

What tax documents should you keep?

Some examples of tax documents you need to retain are W-2s, 1099s, supporting documentation for expenses and deductions, investment and retirement account statements, and property tax and purchase records.

Note: The below information is sourced directly from the IRS. For information on retaining state records, which vary from state to state, visit your state’s Department of Revenue website.

Three-Year Rule…or Longer?

The general rule is that federal tax returns should be retained for three years after filing. However, if you underreport income by 25% or more, the IRS has the ability to go back six, and sometimes seven years. This can occur as a result of complex transactions. For example, if the cost-basis records for any property or securities sold are unclear, it is quite possible to under-report income. If there is the possibility of underreporting income, it is recommended to retain tax returns for this extended window of time.

The IRS published these taxpayer guidelines:

  1. Keep records for three years if situations (4) and (5) below do not apply to you.
  2. Keep records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.
  3. Keep records for seven years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. Keep records for six years if you do not report income that you should report and it is more than 25% of the gross income shown on your return.
  5. Keep records indefinitely if you do not file a return.
  6. Keep employment tax records for at least four years after the date that the tax becomes due or is paid, whichever is later.

A Note on Property Records 

For tax purposes, individual taxpayers and businesses should keep property purchase records for one full year after the property is disposed of. Keep in mind that the IRS can request original purchase documents, so it is important to keep records on both old and new property during this period.

You may want to keep property tax records for longer than one year. For example, your insurance company or certain creditors may request the records, so you may not want to dispose of them until after you are certain you no longer need them for these purposes.

The information provided above is not a substitute for professional advice. Consult with your tax advisor before discarding tax returns or backup documentation.

How can we help?

If you have any questions and would like to connect with a team member please call 404-874-6244 or contact an advisor below.