How long should you keep tax returns?

How long should you keep federal tax records?

At a minimum, you should keep tax records for three years from the date you file your return or two years from the date you pay the tax – whichever is later. If you filed your return early, it will be treated as if it was filed on the due date. For example, if you filed your return in February 2025 before the deadline of April 15, 2025, you must keep your tax records until at least April 15, 2030, which is five years from the due date.

If you are a business owner with employees, you should keep copies of employment tax records for at least four years after the tax due date or the date you paid it – again, whichever is later.

Note: Your creditors or insurance company may require you to keep certain tax records for longer than the Internal Revenue Service requires.

How long should you keep state tax records?

Many states follow the same time frame as federal tax records, but some states allow themselves extra time for audits. These rules can be complex. For example, California has a four-year estimated audit period and requires you to file an amended state return if the IRS adjusts the amount you owe. Check with your state tax authority for state tax audit rules. Keep all records at least until the time limit set by your state expires.

Tips for keeping tax records organized

It doesn’t matter whether you store your tax records on paper or digitally. What you need is a system that allows you to locate your records efficiently if needed.

If you keep paper copies of your tax records, store them in a fireproof and waterproof safe. To organize paper records, you might consider using a separate folder for each tax year. However, the safer and more efficient option is often to scan the records and store them electronically on an encrypted drive or in the cloud. Due to the sensitivity of the information, make sure to secure it with a complex and unique password and enable two-factor authentication.

Takeaway:

• Keep all tax records for at least three years from the date you file your return or two years from the date you pay the tax, whichever is later. If you paid early, keep your records for at least two years from the due date of the tax.
• The IRS usually has three years to audit after you file your return, but it can go back six years in cases of significant error. There is no time limit for an audit if there is suspicion of tax fraud or if you did not file a return for a particular year. So keep this in mind before disposing of records you are no longer required to keep. Having these documents at your fingertips can help you if you need to prove you followed the rules.
• Keep your tax returns along with supporting documents, such as W-2 and 1099 forms, for at least three years. You should also keep copies of receipts, canceled checks, and credit card statements or bank statements that document any expenses you deducted or support tax credits you claimed.
• Keep records relating to property for at least three years after selling it, whether it was your home or other real estate or investments like stocks and bonds. Your records will help you determine profit or loss when selling.
• If you report income that is more than 25% greater than the amount shown on your return, the IRS has six years to audit you. The same rule applies if you report more than $5,000 of foreign financial assets.
• If you…
  If you are deducting a loss due to bad debt or worthless securities, the Internal Revenue Service requires you to keep records for seven years.
• Note: After the Internal Revenue Service determines that you owe taxes, it has ten years to collect your debt.

Note: Check your state’s rules for how long to keep state tax records.

Here are some tips for keeping your tax returns organized. You should be able to easily find your records if you need them in the future, whether printed or electronic.

Source: https://www.thebalancemoney.com/how-long-to-keep-tax-returns-3973943

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