Keeping your tax records organized is essential for financial security, audit protection, and legal compliance. But many taxpayers struggle with a simple question: how many years of individual tax returns to keep? The answer varies depending on your filing situation, potential audits, and the type of documentation involved. This guide provides a clear, expert-backed framework to help you retain the right tax records for the right amount of time.
Short Answer: How Many Years of Income Tax Returns Should You Keep?
For most taxpayers, the IRS recommends keeping tax returns for at least three years from the date you filed. This period generally covers the standard audit window.
However, certain situations require longer retention:
- Underreported income of 25% or more: keep returns 6 years.
- Fraudulent returns or unfiled returns: retain indefinitely.
- Property transactions: retain documents until three years after the sale of property.
Other factors affecting retention include unpaid taxes, legal disputes, or supporting documentation for mortgages, loans, or Social Security claims. The goal is to maintain sufficient proof in case the IRS or another authority requests it.
Understanding How Many Years of Income Tax Returns to Keep
Why Keeping Tax Returns Is Important
Keeping tax records is more than a bureaucratic formality. Here’s why it matters:
- Proof of Income, Deductions, and Credits – Tax returns are official records that verify your earnings and tax credits. They are often required when applying for loans, mortgages, or financial aid.
- Audit Protection – If the IRS audits your return, having complete records ensures you can verify your reported income and deductions.
- Loan and Mortgage Applications – Lenders often request several years of tax returns to assess financial stability.
Without proper retention, you may face unnecessary stress, delayed approvals, or legal complications.
IRS Guidelines for Retaining Tax Returns
The IRS has specific rules for how long taxpayers should keep returns:
- Standard 3-Year Rule: For most taxpayers, keep returns for three years from the date of filing. This is the typical audit window.
- 6-Year Rule: If you underreport income by 25% or more, retain records for six years to protect against IRS audits.
- Indefinite Retention: Keep records permanently if you commit fraud, fail to file a return, or are involved in tax evasion investigations.
- Property or Investment Records: Keep supporting documents for assets until three years after the sale to verify your cost basis and capital gains.
Following these guidelines ensures compliance while protecting you in complex financial situations.
Digital vs. Paper Tax Records
With technology, digital storage has become common, but it must be done correctly:
- Electronic Copies: Digital versions of tax returns are acceptable to the IRS if accurate and readable.
- Best Practices: Use encrypted cloud storage, secure external drives, and organized folders labeled by year.
- Retention: Keep digital records for the same duration as paper records. Consider multiple backups to avoid data loss.
Maintaining well-organized digital or paper records ensures quick access and reduces the risk of missing documents during an audit.
People Also Ask: Common Questions About Keeping Tax Returns
Can I throw away my old tax returns after 3 years?
Yes, if you filed normally and have no special circumstances. Keep longer if there are property sales, underreported income, or ongoing disputes.
How long should I keep supporting documents?
Supporting documents like receipts, W-2s, and 1099s should match the retention period of the related tax return (usually 3–7 years depending on the situation).
Do I need to keep W-2s and 1099s forever?
Not necessarily. Keep them for at least four to seven years to align with IRS audit periods.
How long does the IRS have to audit my returns?
Generally, three years, but this extends to six years for significant underreporting and indefinitely for fraudulent returns.
What happens if I don’t keep tax returns?
Without records, it can be difficult to respond to audits, claim credits, or verify past income for loans or government benefits.
How to Decide How Long to Keep Tax Returns
Step 1: Identify Your Filing Requirements and Tax Situation
- Determine whether your returns are standard or complex.
- Consider self-employment income, property sales, capital gains, or other special transactions.
Step 2: Separate by Retention Category
- Standard 3-year returns – typical filings with no unusual circumstances.
- 6-year returns – cases of underreported income.
- Permanent records – fraud, unfiled returns, property-related documentation.
Step 3: Organize and Store Records Safely
- Paper Filing: Use binders, folders, and date labels to create a clear structure.
- Digital Storage: Encrypt cloud drives or external hard drives; maintain backups.
Step 4: Schedule Regular Purges and Updates
- Conduct annual reviews to remove records past the retention period.
- Use IRS-approved shredding methods for sensitive documents.
Tax Return Retention by Situation
| Tax Situation | Recommended Retention Period | Notes |
|---|---|---|
| Standard tax returns | 3 years | Most common; covers typical audits |
| Underreported income ≥25% | 6 years | Protects against IRS audit for major omissions |
| Fraud or unfiled returns | Indefinite | Never discard if fraud suspected |
| Property or investment sale | Keep until 3 years after sale | Necessary for cost basis verification |
| Payroll records (W-2s, 1099s) | 4–7 years | Matches IRS audit periods |
| Deduction/credit documentation | 3–7 years | Align with related return retention |
FAQs About How Many Years of Income Tax Returns to Keep
- Can I scan old tax returns and discard the paper copies?
Yes, scanned digital copies are acceptable, but ensure backups and security. - How long should I keep tax returns if I am self-employed?
At least 6 years for income reporting; retain additional documentation for property or business assets longer. - Should I keep tax returns used for a mortgage application?
Keep them until the mortgage process is complete and loans are verified. - Do state tax returns have different retention rules?
Yes, many states follow IRS guidelines but may require longer retention periods. - How can I organize years of tax records efficiently?
Use labeled folders or binders for each year; for digital storage, organize by year and category. - What documents are safe to discard after the IRS retention period?
Supporting receipts and old W-2s that no longer pertain to active returns can be shredded safely. - Can keeping old tax returns help with Social Security or pension claims?
Yes, they provide proof of income and contributions when calculating benefits. - How do I handle tax return retention after moving to a digital-only system?
Keep secure backups, ensure encryption, and follow the same retention periods as paper records.
Conclusion
Knowing how many years of income tax returns to keep is crucial for compliance, audit protection, and financial organization. While the standard retention is three years, certain situations like underreported income, property transactions, or potential fraud require keeping records 6 years or indefinitely.
A systematic approach, including organized storage, digital backups, and regular purges, ensures that your tax records are secure, accessible, and fully compliant with IRS guidelines. Keeping the right records for the right amount of time safeguards your finances and provides peace of mind.