How Long To Keep Tax Records

Wondering how to handle those old tax records? Don’t let the files pile up – here’s a basic guide.

How long should I keep tax returns?

Tax Returns and supporting documents should be kept for a period of at least three years following the date you filed or the due date of your tax return, whichever is later.

Why?

Keeping tax returns for 3 year period is tied to the IRS statute of limitations. Under the statute, if you do not file a claim for a refund that you are entitled to, you generally have the later of 3 years from the date you filed the original return or 2 years from the date you paid the tax, to file the claim. Likewise, the IRS generally has only 3 years from the filing date or due date of the return (whichever is later) to assess an additional tax.

Are there exceptions?

There may be some cases in which you should hang onto your records longer than 3 years. For instance, keep tax forms for retirement accounts (i,e, IRAs) until 7 years after the account is totally wiped out. Additionally, if you amortize, depreciate, or buy or sell property, you should keep property records until the statute of limitations expires for the year in which you dispose of the property. Remember, property isn’t just land or buildings; it includes stock, office equipment and other assets.

It’s also important to note that in some cases the statute of limitations is longer than 3 years. For instance, if you omit more than 25% of your gross income from your return, the IRS has six years instead of three to assess an additional tax. Also, if you file a fraudulent return or don’t file one at all (we don’t recommend either), the statute of limitations never expires.

When should I get rid of tax documents?

Before throwing old returns away, check with your accountant to make sure you don’t need to keep them for other purposes. (Certain creditors and insurance companies may require you to keep records longer than the IRS does.) When you do decide to get rid of tax documents, be sure to shred them.

Which Tax Records should I keep?

Keep tax returns and supporting forms (W-2s, 1099s, expense tracking, mileage logs, records supporting itemized deductions, etc.)

What’s the best way to store them?

The best way to store hard copies of tax documents is in a fire-proof safe. Along with your tax records you can keep other important documents like the deed to your house, mortgage and insurance information, your will or trust documents, and passwords to bank and brokerage accounts.

Questions? Contact a member of our team.