How Long Do I Need to Keep My Tax Records?

There are many records and documents, such as your W-2, 1099 interest and dividend statements, and so on, that support the numbers you put on your tax return.  You’ll need these documents should the IRS select your return for audit.  Most IRS examinations go smoothly and quickly if you are well organized and can produce support for any numbers in question.  ON the other hand, audits can become a nightmare if you’re unprepared and can’t prove what’s been reported.  The first step to being prepared is to organize the records at the time you’re preparing the return and then keep them with your return.  If some records need to be stored in other locations, make a copy of the document for your tax return file.  If you get questioned, trying to reassemble records after a couple years have past by can be time consuming and stressful.

Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.  How long you need to keep your records depends on the circumstance.  The general rule, which follows the statute of limitations, is to keep your tax records a minimum of three years.  There are a number of exceptions to the three year rule.  For example, if the document will affect a future tax return, such as the purchase of real estate, the three year rule won’t start until the transaction closes, that is when you sell real estate.  Documents, such as a medical bill, affecting only the current year can usually be destroyed after three years.

Being able to properly support your tax return is important. What to keep and how long you will need to retain your documents can be confusing.  Your tax preparer is familiar with your return and can answer your questions taking into consideration your specific situation.