The General Rules
At minimum, you should keep tax records for as long as the IRS has the ability to audit your tax return or assess additional taxes, which generally is three years after you file your return. This means you potentially can get rid of most records related to tax returns for 2016 and earlier years.
However, the statute of limitations extends to six years for taxpayers who understate their adjusted gross income (AGI) by more than 25%. What constitutes an understatement may go beyond simply not reporting items of income. So a general rule of thumb is to save tax records for six years from filing, just to be safe.
Keep Some Records Longer
You need to hang on to some tax-related records beyond the statute of limitations. For example:
- Keep the tax returns themselves indefinitely, so you can prove to the IRS that you actually filed a legitimate return. (There’s no statute of limitations for an audit if you didn’t file a return or if you filed a fraudulent one.)
- Retain W-2 forms until you begin receiving Social Security benefits. Questions might arise regarding your work record or earnings for a particular year, and your W-2 helps provide the documentation needed.
- Keep records related to real estate or investments for as long as you own the assets, plus at least three years after you sell them and report the sales on your tax return (or six years if you want extra protection).
- Keep records associated with retirement accounts until you’ve depleted the accounts and reported the last withdrawal on your tax return, plus three (or six) years.
Other Reasons to Retain Records
Keep in mind that these are the federal tax record retention guidelines. Your state and local tax record requirements may differ. In addition, lenders, co-op boards, and other private parties may require you to produce copies of your tax returns as a condition to lending money, approving a purchase, or otherwise doing business with you.
Our Records Retention Policy can be found here: https://santoracpagroup.com/resources/records-retention-policy/. Please contact us if you have questions or concerns about recordkeeping.