How Long Should You Keep Tax Records?

How long should you keep personal paperwork related to your finances? If I had to rank the most often asked question at the office, this one is at the top!

So, we prepared this cheat sheet to help guide you but you should always feel free to call us any time with any questions.

How long you keep documents depends on what kind of document it is.

  1. TAX RETURNS

Minimum of 3 years

The IRS has 3 years to question items on your tax return and can bill you for additional taxes that may be owed. Additionally, you have 3 years to file amended returns to seek a refund.

The IRS can go back up to 6 years if they determine a return omits more than 25% of income. If fraud is proven there is no limit to how far they can go back.

State tax returns may need to be retained longer

  1. Real Estate Documents

Hold on to indefinitely

You should have a folder for each piece of real estate you own.

Retain for 3 years after you dispose of the property

  1. Securities Transactions

Hold on to indefinitely

Hold on to purchase documentation as you will have to provide purchase date and cost on your return the year you sell the asset.

Keep records showing stock splits, dividend investments and  non-taxable distributions.

  1. IRA’s and 401K’s

Keep paperwork for three years AFTER the funds have been depleted.

Consider keeping paperwork documenting any distributions from IRA’s or 401k accounts

BUSINESSES EMPLOYEE TAX RECORDS

  1. Keep payroll tax records

4 years after the due date for employees to have filed tax returns

  1. Worker health coverage forms

3 years after filing deadlines for the documents

  1. Asset Costs, Depreciation

Retain indefinitely

Before you dispose of any documents, always review them for information that may be needed at a later date.