How Long to Keep Financial Records

Do you love throwing out unneeded paperwork and other clutter, or are you a packrat? When it comes to your financial records, it’s probably best to be somewhere in between – dispose of records when you can, but not before. How long you should keep financial records depends on the action or event that the document memorializes.

For tax records, you should keep copies of your filed income tax returns permanently, including amended returns. Keep documents that support an item of income, deductible expense, or credit until the statute of limitation has expired for that tax year. The statute of limitations is the period of time within which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax, usually three (3) years. 

The IRS provides more detailed information about the statutes of limitation that apply to income tax return documents:

  1. Keep records for three (3) years after the original filing deadline, unless #4, #5, or #6, below, apply to you.
  2. Keep records for three (3) years from the date you filed your original return or two (2) years from the date you paid the tax, whichever is later, if you file an amended tax return.
  3. Keep records for seven (7) years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. Keep records for six (6) years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
  5. Keep records indefinitely if you do not file a return.
  6. Keep records indefinitely if you file a fraudulent return.
  7. Keep employment tax records for at least four (4) years after the date that the tax becomes due or is paid, whichever is later.

As usually happens with taxes, there are exceptions. For example, tax-related and other records relating to property should be kept until the statute of limitation expires for the year in which you dispose of the property. You will need these records to figure any depreciation deduction and to figure the adjusted basis and the gain or loss when you sell or otherwise dispose of the property. Records for nontaxable property exchanges should be kept for the old property that you gave up, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property.

Records no longer needed for tax purposes might be needed for another reason. Do not discard them until you check on whether you have to keep them longer for other purposes. For example, your insurance company or creditors may require you to keep some documents longer than the IRS does.

Need more details about whether you’re throwing out too much or you’re being a packrat? The IRS has them for your at https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records.