How Long To Keep Tax Records: Can You Ever Throw Them Away?

How Long To Keep Tax Records: Can You Ever Throw Them Away?

Michael Keenan   Sat, February 5, 2022,

Once you’ve submitted your tax return to the Internal Revenue Service each year, the last thing you probably want to think about is how to store your tax records. But making these arrangements is essential to protect yourself in the event of a future IRS audit.

The general rule is to keep your tax records for three years, but there are several important exceptions for when you might need to keep your tax records for a longer period as a taxpayer. Read on to learn how long to keep your tax records and when you can safely dispose of them.

Determining Expiration of the Statute of Limitations

Typically, the statute of limitations for the IRS to audit your tax return is generally three years. For an income tax return, the period of limitations is three years. But the IRS says it’s wise to keep your tax returns even longer. For example, if the IRS audits you, you’ll have the documents you need to protect yourself from an audit. The statute of limitations starts running on the later of the due date for your tax return or the date on which you file your taxes.

Special Tax Items

You’ll need to keep your records for seven years if you claim a deduction of worthless securities or bad debts. For example, if you lent a friend $10,000 under a promissory note and the friend went bankrupt, keep records to prove that it was a legitimate debt discharged in bankruptcy that was never paid.

Another special tax item is employment taxes. Keep records for employment taxes for four years from the later of the date the tax is due or the date you pay the tax.

Records Related To Property

When your tax return includes information related to property, keep those records until the statute of limitations — typically three years — runs out for the year in which you sell or otherwise dispose of the property.

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