Record retention guide

How Long To Keep Tax Records

You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support items shown on your return until the period of limitations for that return runs out. The period of limitations is the period of time in which you can amend your return to claim a credit or refund or the IRS can assess additional tax. Table 1 contains the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period beginning after the return was filed. Returns filed before the due date are treated as being filed on the due date.

Property: 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 figure your basis for computing 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. You must keep the records on the old property, as well as the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Keeping records for nontax purposes: When your records are no longer needed for tax purposes, do not discard them until you check to see if they should be kept longer for other purposes. Your insurance company or creditors may require you to keep certain records longer than the IRS does.

Table 1. Period of Limitations

If you…

THEN the period is…

1 Owe additional tax and (2), (3) and (4) do not apply

3 years

2 Do not report income that you should and it is more than 25% of the gross income shown on your return

6 years

3 File a fraudulent return

No limit

4 Do not file a return

No limit

5 File a claim for credit or refund after you filed your return

Later of 3 yrs or 2 yrs after tax paid

6 File a claim for a loss from worthless securities

7 years

Table 2. Proof of Income and Expense

FOR items concerning your… INCOME

KEEP as basic records…

  • Form(s) W-2
  • Form(s) 1099
  • Bank Statements
  • Form(s) K-1

FOR items concerning your… EXPENSES

KEEP as basic records…

  • Sales slips
  • Invoices
  • Receipts
  • Canceled checks or other proof of payment
  • Written communications from qualified charities

FOR items concerning your… HOME

KEEP as basic records…

  • Closing statements
  • Purchase and sales invoices
  • Proof of payment
  • Insurance records
  • Receipts for improvement costs

FOR items concerning your… INVESTMENTS

KEEP as basic records…

  • Brokerage statements
  • Mutual fund statements
  • Form(s) 1099
  • Form(s) 2439

If payment is by CASH

Then the statement must show…

  • Amount
  • Payee’s name
  • Transaction date

If payment is by CHECK

Then the statement must show…

  • Check number 
  • Amount
  • Payee’s name
  • Date the check amount was posted to the account by the financial institution

If payment is by DEBIT or CREDIT CARD

Then the statement must show…

  • Account charged
  • Payee’s name
  • Transaction date

If payment is by ELECTRONIC FUNDS TRANSFER

Then the statement must show…

  • Amount transferred
  • Payee’s name
  • Date the transfer was posted to the account by the financial institution

If payment is by PAYROLL DEDUCTION

Then the statement must show…

  • Amount
  • Payee code
  • Transaction date

Account statements: You may be able to prove payment with a legible financial account statement prepared by your bank or other financial institution.

Pay statements: You may have deductible expenses withheld from your paycheck, such as union dues or medical insurance premiums. You should keep your year-end or final pay statements as proof of payment of these expenses.

Specific Records

This section is an alphabetical list of some items that require specific records in addition to your basic records.

If you receive or pay alimony, you should keep a copy of your written separation agreement or the divorce, separate maintenance, or support decree. If you pay alimony, you also will need to know your former spouse’s social security number.