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How Long Should You Hold On To Old Tax Records?

In an ever changing landscape of technology and electronic filing of documents, how long should you keep a paper copy or an electronically stored copy of your tax records? Generally, taxpayers should hold on to their tax records for at least 3 years unless...


This is a common question: How long must taxpayers keep copies of their tax returns and supporting documents? 

In an ever changing landscape of technology and electronic filing of documents, how long should you keep a paper copy or an electronically stored copy of your tax records?  Generally, taxpayers should hold on to their tax records for at least 3 years after the due date of the return to which those records apply. Important note: Although you can discard backup records, do not throw away the filed copies of any tax returns or W-2s.  Often, these returns provide data that can be used in future tax-return calculations or to prove the amounts of property transactions, social security benefits, and so on. Details on the type of documents are described below.

However, if the original return was filed later than the due date, including if the taxpayer received an extension, the actual filing date is substituted for the due date. A few other circumstances can require taxpayers to keep these records for longer than 3 years.   The IRS can assess additional taxes without regard to time limits if a taxpayer (a) doesn’t file a return, (b) files a false or fraudulent return to evade taxation, or (c) deliberately tries to evade tax in any other manner.

The statute of limitations in many states is 1 year longer than in the federal statute. This is because the IRS provides state tax authorities with federal audit results. The extra year gives the states adequate time to assess taxes based on any federal tax adjustments.  At Hippo Tax Services, we aid our clients in answering notices from the Internal Revenue Service and their respective state filings. 

In addition to the potential confusion caused by the state statutes, the federal 3-year rule has a number of exceptions that cloud the recordkeeping issue: 

The assessment period is extended to 6 years if a taxpayer omits more than 25% of his or her gross income on a tax return.

The IRS has unlimited time to assess additional tax when a taxpayer files an unsigned return. 

If none of these exceptions apply to you, then for federal purposes, you can probably discard most of your tax records that are more than 3 years old; however, you may need to add a year or more if you live in a state with a statute of longer duration. 

You should also keep certain records for longer than 3 years:

Stock acquisition data.  If you own stock in a corporation, keep the purchase records for at least 4 years after selling the stock. The purchase data is needed to prove the amount of profit (or loss) that you had on the sale. 

Statements for stocks and mutual funds with reinvested dividends.  Many taxpayers use the dividends that they receive from a stock or mutual fund to buy more shares of the same stock or fund. These reinvested amounts add to the basis of the property and reduce the gain when it is eventually sold. Keep these statements for at least 4 years after final sale. 

Tangible property purchase and improvement records.  Keep records of home, investment, rental-property or business property acquisitions, as well as all related capital improvements, for at least 4 years after the underlying property is sold. 

The IRS can provide copies of prior-year returns.  Taxpayers who have misplaced a copy of a prior year’s return can order a tax transcript from the IRS. This transcript summarizes the return information and includes AGI. This service is free and is available for the most current tax year once the IRS has processed the return. These transcripts are also available for the past 6 years’ returns. When ordering a transcript, always plan ahead, as online and phone orders typically take 5 to 10 days to fulfill.

Mail orders of transcripts can take 30 days (75 days for full tax returns). There are three ways to order a transcript: 

Online Using Get Transcript. Use Get Transcript Online on IRS.gov to view, print or download a copy for any of the transcript types. Users must authenticate their identities using the Secure Access process. Taxpayers who are unable to register or who prefer not to use Get Transcript Online may use Get Transcript by Mail to order a tax return or account transcript. 

By phone. The number is 800-908-9946.

By mail. Taxpayers can complete and send either Form 4506-T or Form 4506T-EZ to the IRS to receive a transcript by mail. 

Those who need an actual copy of a tax return can get one for the current tax year and for as far back as 6 years. The fee is $50 per copy. Complete Form 4506 to request a copy of a tax return and mail that form to the appropriate IRS office (which is listed on the form). 

If you have questions about which records you should retain and which ones you can dispose of, a member of Hippo Tax Services is always available to help you.

Please check with your tax advisor, your Curran Wealth relationship manager, or contact Curran Wealth Management if you have any questions.  518.391.4200 • info@curranllc.com

The material contained in this article is for educational and informational purposes only.  The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness.  The contents of this article are based on the tax laws existing at the time of publication.  Tax laws are subject to continual change.  In addition, tax laws vary by state.  This article is not, and should not be regarded as tax advice.  The information contained in this article may not apply to your personal circumstances.  Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation.  If you would like a detailed analysis of your tax situation, with specific tax recommendations, you can discuss the possibility of pursuing a formal relationship with Hippo Tax Services.