How Long to Keep Tax Documents

February 1st, 2018

Regarding how long to keep your returns, here is the long answer: The IRS generally has up to three years after the tax-filing deadline to initiate an audit, so keep your tax returns and supporting documents at least that long—in other words, after this upcoming April 15th, hang on to returns and documents for the preceding three tax years. However, that would be the minimum amount of time we would recommend. The IRS has up to six years to audit anyone who neglects to report more than 25% of his or her income even if inadvertently. It doesn’t hurt to keep the actual returns forever, in case you need them when you apply for a mortgage/refinance or need to track down the value of certain assets.

And there are other documents you should keep beyond the three or six years: Keep copies of your W-2 forms; 1099 forms reporting interest, dividends, capital-gains distributions and other income; canceled checks and receipts for charitable donations; records showing eligible expenses for other deductions and credits (and eligible expenses for health savings account and 529 withdrawals); and other information you needed to document income or deductions. Keep Form 8606 reporting nondeductible contributions to traditional IRAs until you withdraw all of the money from the IRAs, so you can prove that you’ve already paid taxes on the contributions and won’t be taxed on them again. Also, retain any documentation pertaining to loss carry forwards such as capital transactions, investment interest expense, passive activities and charitable contributions, etc.

Keep records showing the purchase date and price of stocks and mutual funds in taxable accounts. You’ll have to report the purchase date and price when you sell the investment so you can establish the basis and determine the taxable gain or loss. Brokers must report the cost basis of stocks purchased in 2011 or later and mutual funds and ETFs purchased in 2012 and or later, but even for investments you made after then, it helps to keep your own records in case you switch brokers. If you inherit stocks or funds, keep records of the value on the day the original owner died to help calculate your basis when you finally sell them.

Starting with the 2014 tax year, you’ll also need to keep records showing that you had minimum essential health insurance coverage or qualified for an exemption, and records of any premium subsidy you received.

The bottom line is to the extent you are able, we recommend you scan in all old tax returns and the supporting data and keep in a safe place. In a PDF format probably makes the most sense.

You are here: Home » Blog » How Long to Keep Tax Documents