How Long Should You Keep Your Tax Records?
Written by Larry Hall
November 3, 2024
As a tax preparer, one of the most common questions I hear from clients is: "How long should I keep my tax records?" It's an important question because keeping the right documents for the right amount of time can help you stay out of trouble in the event of an audit. Let’s break it down.
General Rule: Three Years
The IRS generally recommends keeping tax records for at least three years from the date you filed your tax return. Why three years? That’s the time frame within which the IRS can audit your return or ask for additional documentation. However, it’s not quite that simple.
Exceptions to the Rule
While three years covers most situations, there are important exceptions:
Six Years: If you underreported your income by more than 25%, the IRS can go back six years to audit your return.
Seven Years: If you filed a claim for a deduction related to bad debt or worthless securities, the IRS advises keeping those records for seven years.
Indefinitely: If you never filed a tax return or filed a fraudulent one, the IRS has no time limit on how far back they can look.
What Records Should You Keep?
Here’s a checklist of key documents to keep on file:
Tax Returns (Form 1040 and supporting schedules)
W-2 and 1099 Forms (income statements)
Receipts & Invoices (business expenses, charitable donations, medical costs)
Bank Statements (proof of payments and deductions)
Investment Records (stock purchases and sales)
Property Records (real estate purchases, improvements, and sales)
Digital vs. Paper Storage
Many taxpayers have switched to digital recordkeeping, scanning documents, and storing them securely in cloud services or on external hard drives. If you prefer paper copies, consider using a fireproof safe to keep important records safe from damage.
Final Thoughts
Keeping tax records organized can save you time and stress down the road. A good rule of thumb: when in doubt, keep it longer! If you're unsure about specific records, reach out to a tax professional.
I’m Larry Hall, EA, and I’m here to help. If you have questions about tax records or filing, contact me at www.HallTaxPro.com.
Source: irs.gov.
This article is for informational purposes only and should not be considered professional tax advice. For guidance on your specific tax situation, consult a tax professional.
