Tax Records Retention Guide
Keep what you need, shred what you don't. A complete guide to managing your tax records and documents.
Why Record Retention Matters
Proper record retention protects you in case of an IRS audit, helps with insurance claims, and provides documentation for loan applications. However, storing unnecessary documents can create clutter and potential security risks.
The IRS generally has 3 years from your filing date to audit your return. However, there are exceptions where they may go back 6 years or even indefinitely in cases of fraud or unfiled returns.
🌐 Use Our Client Portal
Our secure client portal provides a safe, convenient way to store and organize your important tax documents. With encrypted storage and easy access from anywhere, you can keep your records organized and readily available when you need them. Ask us about portal access when you schedule your consultation!
⚠️ Important Note
Identity theft is a serious threat. After it is no longer necessary to retain your tax records, financial statements, or any documents with personal information, you should dispose of these records by shredding them (use a cross-cut shredder) and not merely throwing them away in the trash.
Personal Tax Records
Keep for 1 Year
- • Bank statements (monthly - keep year-end for longer)
- • Paycheck stubs (reconcile with W-2, then can discard)
- • Cancelled checks (for routine expenses)
- • Monthly and quarterly mutual fund and retirement contribution statements (reconcile with year-end statement)
Keep for 3 Years
- • Credit card statements
- • Medical bills (in case of insurance disputes)
- • Utility records
- • Expired insurance policies
Keep for 6-7 Years*
- • Supporting documents for tax returns (receipts, W-2s, 1099s, etc.)
- • Accident reports and claims
- • Medical bills (if tax-related/deducted)
- • Property records and improvement receipts
- • Sales receipts for major purchases
- • Wage garnishments
- • Other tax-related bills
*Records related to a bad debt deduction or a loss claimed for worthless securities should be kept for 7 years.
Keep Forever
- • Income tax returns (federal and state)
- • Income tax payment checks
- • CPA audit reports
- • Investment trade confirmations
- • Retirement and pension records
- • Legal records and important correspondence
📋 Special Circumstances
Car records: Keep until the car is sold
Credit card receipts: Keep with your credit card statement
Insurance policies: Keep for the life of the policy
Mortgages/Deeds/Leases: Keep 6 years beyond the agreement
Pay stubs: Keep until reconciled with your W-2
Property records/improvement receipts: Keep until property sold
Sales receipts: Keep for life of the warranty
Stock and bond records: Keep for 6 years beyond selling
Warranties and instructions: Keep for the life of the product
Other bills: Keep until payment is verified on the next bill
Depreciation schedules and other capital asset records: Keep for 3 years after the tax life of the asset
💡 Storage Best Practices
Create a Backup Set of Records
Keeping a backup set of records — including bank statements, tax returns, insurance policies, etc. — is easier than ever now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet.
Even if the original records are provided only on paper, they can be scanned and converted to a digital format. Once the documents are in electronic form, you can download them to a backup storage device, such as an external hard drive, or burn them onto a CD or DVD.
Consider online backup, which is the only way to ensure that data is fully protected. With online backup, files are stored in another region of the country, so that if a hurricane or other natural disaster occurs, documents remain safe. Our client portal provides secure, encrypted storage for all your important tax documents.
Keep Them Secure
- → Use a fireproof safe for paper documents
- → Store digital records with encrypted backups
- → Use our secure client portal for convenient cloud storage
- → Enable two-factor authentication on all accounts
Go Digital When Possible
- → Scan important documents and receipts
- → Use descriptive file names with dates
- → Organize by year and category
- → Upload to our client portal for safekeeping
Set Annual Reminders
- → Review records annually after filing taxes
- → Purge documents that have reached retention limits
- → Update your system as life changes occur
Dispose Properly
- → Shred all documents with personal information
- → Use a cross-cut shredder (not strip-cut)
- → Permanently delete digital files (don't just move to trash)
Frequently Asked Questions
What if I'm audited and don't have my records?
Without proper documentation, the IRS may disallow deductions or credits you claimed. This could result in additional taxes, penalties, and interest. It's crucial to maintain records for the full retention period. If you've lost records, you may be able to reconstruct them through bank statements, credit card statements, or by contacting vendors for duplicate receipts.
Can I keep digital copies instead of paper?
Yes! The IRS accepts digital records. In fact, electronic storage is often safer and more organized than paper. Just make sure to keep backups in multiple locations and ensure scans are clear and legible. Our secure client portal is an excellent option for storing your digital tax documents with encrypted protection and easy access when you need them.
Why do I need to keep records longer than 3 years?
While the IRS typically has 3 years to audit, there are important exceptions. They have 6 years if you underreported income by more than 25%, and unlimited time if you didn't file a return or filed a fraudulent return. For property and investments, you need records to prove your cost basis when you sell, which could be many years after purchase.
What about records for a business I closed?
Keep all business records for at least 7 years after you close the business. This includes the final tax return year. If you had employees, keep employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later. Corporate formation documents and final returns should be kept permanently.
How can your client portal help me?
Our secure client portal provides encrypted cloud storage for all your important tax documents. You can upload receipts, W-2s, 1099s, and other documents throughout the year, making tax time much easier. The portal is accessible 24/7 from anywhere, and all files are backed up to protect against data loss. Ask us about getting portal access when you schedule your consultation!
Should I keep monthly bank and credit card statements?
Keep year-end statements for 7 years to support your tax returns. Monthly statements can typically be discarded once you've reconciled them and verified all transactions, unless they contain documentation of a major purchase or tax-deductible expense. Many people keep them for one year for reference, then shred them if there are no issues.
Need Help Organizing Your Records?
We can help you establish a record retention system and ensure you're compliant with all requirements. Ask about access to our secure client portal for easy document storage!