How Long Do I Need To Keep Tax Records?

 

There is no simple answer for this question. Records such as bank statements, canceled checks, credit card statements, receipts and other documents that prove an item of income, deduction or credit appearing on your return should be kept until the statute of limitations expires for that tax return. For federal tax returns this is usually three years from the date the return was due or filed, or two years from the date the tax was paid, whichever is later. You may keep a physical paper copy or an electronic copy such a PDF or image file (Examples: JPG, GIF, TIFF).

For state tax returns, this is usually four years, since the statute of limitations is usually longer than the federal requirements.

The federal three year rule has some EXCEPTIONS:

  • The assessment period is extended to six years instead of three years if you do not report income that you should report, and it is more than 25% of the gross income shown on your tax return.

  • There is no time frame for the IRS to access tax and tax records must be kept indefinitely if you do NOT file a tax return, OR you file a fraudulent tax return.

  • You must keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.

  • You must keep all employment (payroll) tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Click here for a detailed payroll record retention schedule.

NOTES: Tax returns that are filed BEFORE the due date are considered to be filed on the due date. You may store your tax records and supporting documentation electronically such as in PDF Files.


You should keep certain records for longer than three years or indefinitely. These records include, but are not limited to:

  • Federal and State Income Tax Returns - These should be kept indefinitely, along with proof of mailing (certified mail, return receipt, etc.) or proof of electronic filing.

  • Supporting Documents for Items on Your Tax Returns - These include W-2s, 1099s, 1098s, cancelled, imaged, or substitute checks, receipts, bills, credit card statements, mileage logs, and all other documents that verify income, deductions, and credits should be kept for a minimum of 7 years.

  • Stock Acquisition Statements - If you own stock in a corporation, keep the purchase records for at least 7 years after the year you sell the stock. This information will be needed to prove the amount of gain or loss you had on the sale or exchange of stock.

  • Stock and Mutual Fund Statements Showing Dividend Reinvestments - Many taxpayers use the dividends they receive from a stock or mutual fund to buy more shares of the same stock or fund. The reinvested amounts increase the basis of the shares. Keep statements at least 7 years after final sale of shares.

  • Property Purchase and Improvement Records - Keep records of home, investment, rental property, or business property acquisitions and related capital improvements for at least 7 years after the property is sold. Also keep records of items that may reduce the basis of these assets such as energy credits or homebuyer tax credit that may have been claimed on the property. Also keep records or depreciation, amortization, and/or depletion on the property.

  • IRA Basis - Form 8606 tracks your basis in traditional IRA's. This information is needed for when you start making withdrawals to determine the portion of the distribution that is nontaxable. Also, keep track of Roth IRA contributions and distributions. These records need to be kept indefinitely.

  • Records of Nontaxable Income - You may need to show that income which was NOT reported on your tax return came from nontaxable sources. Keep records for at least three years from the date the return was due or filed, or two years from the date the tax was paid, whichever is later. Click here for examples of nontaxable income.

  • Personal Records - Items such as birth certificates, death certificates, voter registration, selective service registration, passports, Social Security cards, marriage licenses, divorce agreements, wills, trust documents, copies of estate and gift tax returns, deeds for real estate, mortgage documents, vehicle titles, adoption records, etc. should be maintained in a permanent file. These are important documents that may be needed to verify information on a tax return but are also needed in various life situations.