A:

The Internal Revenue Service (IRS) has some hard and fast rules regarding how long taxpayers should keep their tax records.

As the IRS puts it, the duration of your tax record keeping depends on the “action, expense, or event” impacting those records.

Those actions, and those timelines, are important, as they impact the statute of limitations on any amendments to your tax return, or the federal government’s ability to demand additional tax payments from you.

To comply with IRS documentation mandates, keep the following tax records for the following time periods:

Document Duration of Record Keeping
Federal tax returns At least three years
Reason: Uncle Sam only has three years to assess additional tax payments. On the flip side, taxpayers only have three years to make a claim they were entitled to, but did not receive.
Investment forms At least seven years
Reason: The IRS wants taxpayers to hold on to individual retirement account (IRA) documents, home sales paperwork and other key investments for seven years. The agency may need to go back that far to ascertain accurate payment on taxes owed on investment accounts.
Bank statements Two years
Reason: In general, bank statements and employment paycheck stubs need only be kept for two years.

If you have under-reported any federal taxes, keep your tax documents from the past six years, starting with the year the taxes were under-reported. If you have failed to file a form, or filed a fraudulent form, don’t toss tax records away. The IRS has a legal right to review them.

The period of limitations is the time in which you can amend your tax return to claim a credit or refund, or the time in which the IRS can assess additional tax.

The following information contains the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.

Note: Keep copies of your filed tax returns. They help in preparing future tax returns and making calculations if you file an amended return.

1. You owe additional tax and situations (2), (3), and (4), below, do not apply to you: Keep records for three years.

2. You do not report income that you should report, and it is more than 25% of the gross income shown on your return: Keep records for six years.

3. You file a fraudulent return: Keep records indefinitely.

4. You do not file a return: Keep records indefinitely.

5. You file a claim for credit or refund after you file your return: 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.

6. You file a claim for a loss from worthless securities or bad debt deduction: Keep records for seven years.

7. Keep all employment tax records for at least four years after the date that the tax becomes due or is paid, whichever is later.

Important Questions

The following questions should be applied to each record as you decide whether to keep a document or throw it away:

Are the records connected to assets?

Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. You must keep these records to determine any depreciation, amortization or depletion deduction, and to find the gain or loss when you sell or otherwise dispose of the property.

Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition.

What should I do with my records for nontax purposes?

When your records are no longer needed for tax purposes, do not discard them until you are certain you won’t need them for other purposes. For example, your insurance company or creditors may require you to keep records longer than the IRS does. When in doubt, play it safe and keep the records.

RELATED FAQS
  1. Can I use my IRA savings to start my own savings?

    While there is no legal reason why you cannot withdraw funds from your IRA to start a traditional savings account, it is ... Read Full Answer >>
  2. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  3. How do you calculate penalties on an IRA or Roth IRA early withdrawal?

    With a few exceptions, early withdrawals from traditional or Roth IRAs generally incur a tax penalty equal to 10% of the ... Read Full Answer >>
  4. Are credit card rewards taxable?

    Credit card rewards are taxable in the United States some of the time. The Internal Revenue Service (IRS) classifies credit ... Read Full Answer >>
  5. What is the Social Security tax rate?

    The Social Security tax rate is 12.4% as of 2015. Of that amount, the employee is responsible for half, or 6.2%, and the ... Read Full Answer >>
  6. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
Related Articles
  1. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  2. Taxes

    How To File Your Child's First Income Tax Return

    Use this quick parental guide to help your child learn the tax filing process and establish good habits.
  3. Taxes

    How To Get The Most Money Back On Your Tax Return

    These tips will help you get a larger refund this year, while teaching you how to pay less taxes going forward.
  4. Taxes

    Tax Issues For Same-Sex Spouses

    The tax rules for same-sex spouses are largely the same as for traditional filers, but there are a few special considerations that apply.
  5. Taxes

    Tax Software Vs. An Accountant: Which Is Right For You?

    We look at the pros and cons of using tax software versus an accountant when filing your tax return.
  6. Taxes

    Last-Minute Tax Tips For 2013

    A combination of new taxes and expiring tax reductions and new surtaxes are conspiring to make your 2013 taxes – and your 2014 tax planning – a bit more interesting than usual.
  7. Insurance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  8. Investing Basics

    Understanding How Dividends Are Taxed

    Learn how dividends are taxed by the IRS, and understand the different types of dividend income as well as the capital gains tax rates.
  9. Taxes

    What IRS Form 990 Tells About a Nonprofit

    Want a picture of an organization's activities? This annual form, open to the public, sums up everything from salaries paid to missions accomplished.
  10. Retirement

    The 3 Most Common 401k Rollover Mistakes

    No one is born knowing the tax rules for 401(k)s and IRAs, but only dummies, scaredy cats and suckers don't buckle down to learn them.
RELATED TERMS
  1. Section 1231 Property

    A tax term relating to depreciable business property that has ...
  2. Duty Free

    Goods that international travelers can purchase without paying ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Tax Deductible Interest

    A borrowing expense that a taxpayer can claim on a federal or ...
  5. Guideline Premium And Corridor Test (GPT)

    A test used to determine whether an insurance product can be ...
  6. Cash Value Accumulation Test (CVAT)

    A test method used to determine whether a financial product can ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!