How Long Should You Save Tax Returns? 

how long should you keep tax records for

With tax season behind us, you may be wondering what to do with the documents you have collected throughout the filing process. It is important to hang onto all forms, receipts, and other documents, even after Tax Day has passed. Shred Nations know how long you should save tax returns and has secure shredding options for your disposal needs.

The IRS generally has three years (from the due date of your return or the date you file, whichever is later), to file an audit. You should save all tax records until that time has passed or longer. Some documents may need to be kept indefinitely.  

Below, we will take a closer look at the documents you need to save and for how long. We will also discuss how to safely dispose of tax documents when they are no longer needed.  

Which Tax Documents Should You Keep? 

In the event of an audit, you will need documentation to prove your tax return was accurate. The IRS may ask for documentation related to deductions, loans, income, and more. However, there are limits to how far back they can look.  

In general, it is best practice to keep any forms or documentation related to: 

  • Income – W-2s, 1099s, bank statements, etc. 
  • Expenses & Deductions – Invoices, receipts, alimony paid, charitable donations, etc. 
  • Home & Property – Purchase records, sales invoices, closing statements, property tax assessments, etc. 
  • Retirement Accounts – Form 5498, Form 8606, 401(k) statements, distribution records, etc. 
  • Investments – transaction data, receipts, annual statements, etc. 

The statute of limitations can vary for these documents, but they should be kept for a minimum of three years from the date of filing.  

how long should you keep tax documents for

Exceptions to the Three-Year Rule 

Generally, the statute of limitations for an IRS audit is three years. However, there are exceptions. If you have underreported your income by 25 percent or more, the IRS can go back six years or seven years if you have claimed losses for bad debt or worthless securities. If you do not file or file a fraudulent return, the IRS has no statute of limitations.  

The statute of limitations varies for state income taxes. Some states have four or five years to audit. You will want to check your local tax laws for the correct record-keeping timelines.  

Most tax documents will follow the three-year rule. Here are some exceptions: 

Tax records to dispose of after one year: 

  • Pay stubs that have been checked against and match with your W-2s. 
  • Monthly brokerage statements that have been checked against and match with year-end statements and 1099s.  

Tax records to dispose of after six years: 

  • Individuals who receive multiple 1099s are more likely to underreport their income. To be safe, 1099s, receipts, and other business expense records should be saved for 6 years.  
  • Tax records related to foreign financial assets. 

     Tax records to dispose of after seven years: 

  • Records and documents related to worthless securities or bad debts.  

     Tax records to keep indefinitely: 

  • Records of assets such as stocks, bonds, and property. The IRS recommends keeping these documents until the statute of limitations expires from the date of sale.  
  • Each year’s 1040 and any associated schedules sent to the IRS that year. You may need these documents to apply for loans or other financial assistance.  

How to Dispose of Tax Returns 

tax documents

When the statute of limitations has passed, you can dispose of your documents. Tax records contain valuable personal information, so it is important to dispose of these documents safely.  To prevent identity theft, tax records should never be thrown directly in the trash. All documents should be securely shredded to protect your information. Shred Nations offers affordable and secure shredding services to dispose of tax returns and other sensitive information. We have a nationwide network of reliable shredding companies that can dispose of your tax records today.   

Safely Dispose of Tax Returns with Shred Nations 

Call us at (800) 747-3365 or complete the form to connect with a shredding provider near you. We will send you free quotes on shredding services large or small.  

Ideal for tax season shredding, our mobile shredding services can come directly to your home or business and complete your shredding project onsite. Need a more flexible option? Try Ship ‘N’ Shred services to complete your shredding when it is most convenient for you.