How long you should keep your tax returns, and supporting documentation, is an issue of much debate in the personal finance world. Some people say seven years, some people say keep it forever, and some people say it isn’t worth the space. Ok well most people probably don’t say it isn’t worth the space but really how long are we supposed to keep this crap for. I just looked in my cabinet and I have returns from 2000-2008, that is eight years. Of course further inspection shows I really only have all the documents since about 2002 or 2003 and just returns through 2000. Looking at this mess I wondered how long do I need to keep this crap. Seriously that is all it is to me is stuff that should be shredded and recycled. Giant wastes of paper sitting in a drawer taking up space. Unfortunately the IRS doesn’t agree with my assessment so lets look at what they have to say about the matter.
Maximum Retention
According to the IRS the maximum amount of time you should hang on to any tax related document is, well forever actually. If you file a “Fraudulent return” or don’t file a return the IRS says you need to keep you records indefinitely. That means forever folks. Of course if you are filing fraudulent returns it probably isn’t going to help if you kept the records to prove it was fraudulent.
The Real Deal
I am assuming you are all honest people and aren’t trying to cheat the system. There are several different scenarios that affect how long you should keep your records on hand. According to the IRS:
- Keep all employment records for at least 4 years after the tax is due or paid, whichever is later
- Keep records for 7 years if you file a claim for worthless securities or bad debt.
- Keep records for 6 years if you fail to report income and it is more than 25% of your gross income shown on your return
So What Should You Do?
If you are filing returns and not doing it fraudulently the maximum amount of time the IRS thinks you should hold on to your documents is 7 years. Odds are that is going to be beyond what you need to do for most people so why not just stick with it and hold them for 7 years. That way if the IRS comes knocking on your door you are covered back through 7 years. At the very least keep your records for 4 years to meet the requirements for employment records.
I would love to hear from everyone on how many years of records they currently have and if they think they would pass an audit, leave me a comment and let me know.
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Yes, sadly, forever is the correct answer. Especially if you own your own business. I think I heard that during an audit the IRS does not usually check files past ten years prior, but I’m not sure where I heard that. Thanks for the insight.
I’m currently holding onto returns dating back until 1998. The only reason I haven’t parted ways with them is because they just don’t take up that much room. I can fit everything in a nice little box, my returns and information are very straight forward which helps to reduce the space required. I have scanned copies as well, I’m just not sure I want to shred the hard copies yet.
Wow 1998, sounds like you are the right track to keep with @Griff’s suggestion of keeping them forever. It is a shame we have to live in fear of the taxman knocking on the door. I just talked to a buddy of mine who is getting ready to amend his 2007 and 2008 returns, I told him he better hang onto everything for a while because it is going to increase his chances for an audit.
I have records back to 1990.. have been thinking about tossing up to 2000, but as Jeff said, they don’t take up that much room. I have them in 1 file in my file cabinet – it’s a pretty thick file, though, lol. Maybe next year. 🙂
The other thing I would recommend keeping in addition to tax records are paychecks. Keep 12 months from your current employer, and then maybe your first and final one from past employers. These could be very useful if asked for employment references etc. Also a good way to see how your pay changes over your career.
Well I guess I am the dummy as I have all of my tax records and receipts back to 1977. They take up a lot of room and that is why I am trying to find out how long to keep them.
I have all my tax returns and ALL supporting papers, receipts, notes, etc. dating back to 1996. It IS space consuming, which is exactly why I went searching for advice about this. I think I will get rid of the ones thru 2003.
I kept my very first tax return which is 40 years sold.
I have every return from 1984 when filed for the first time. Got onto this site to see how long I was supposed to keep them. Guess I keep collecting them forever.
Well, I threw my stuff out from the 1990’s, thinking it was SO long ago. Now I am in big financial trouble. Though my traditional IRA contributions were not taxable, I cannot document it – the records from the Mutual Fund company is not adequate. I thought it would be, but I also need to prove what my income was for the years I made those contributions. I cannot order copies of the tax returns because the IRS does not keep the data. The lesson here is to keep it forever.
Do you think saving them fro 10 years will be Ok?
Thakes.
I know I have all tax returns and records since getting married in 1988. Since turning 40 a couple of years ago, I have found that I am more willing to let things go. Hopefully, the shredder will last through at least 12 of those years.
I am helping a friend whose Dad passed away 12-30-2010 and am wanting to know how long we should keep his tax records?
Well i have tax records from 1994 and like most have said they don’t take up to much space if you keep them in order. I also like to keep most of my records for bank and creit cards and bill statements for 7 years. Not sure if i need to do this what do you think.
The length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out.
Good reminder. I suspect that many people file away a copy of taxes soon after sending but then don’t think about it again. Actually, there are probably some that don’t think about it at all.
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