Record Retention Guide
How long to keep tax documents — category by category.
Why Retention Matters
The IRS generally has three years from the filing date to audit your return. But if you underreported income by more than 25%, that extends to six years. If you filed fraudulently, there's no statute of limitations.
Keeping the right records protects you — but keeping everything forever creates clutter and risk.
Keep Permanently
- Tax returns — Keep copies of all filed returns (Form 1040, 1120, 1120-S, 1065, etc.)
- Business formation documents — Articles of incorporation, LLC operating agreements, partnership agreements
- Retirement account records — IRA and 401(k) contribution records (to prove basis)
- Home purchase records — Closing statements, improvement records (to calculate gain on sale)
- Investment purchase records — Stock purchase confirmations (to calculate basis)
Keep for 7 Years
- Business income and expense records — Invoices, receipts, bank statements
- Employment tax records — Payroll records, W-4s, I-9s
- Asset purchase records — Equipment, vehicles, real estate (for depreciation)
- Loan documents — Promissory notes, amortization schedules
Keep for 3 Years
- Supporting documentation for tax returns — W-2s, 1099s, deduction receipts
- Bank and credit card statements — If not needed for business records above
- Medical records — If claiming medical expense deductions
Keep for 1 Year
- Deposit and withdrawal records — If not needed for business records
- Receipts for minor purchases — Office supplies, small expenses
Shred Immediately
- Draft documents — Working papers, calculations
- Duplicate records — Extra copies of documents you've already kept
- Expired documents — Anything past the retention period
Special Situations
Real Estate
Keep purchase records, improvement receipts, and depreciation schedules until three years after you sell the property and file the return reporting the sale.
Stocks and Investments
Keep purchase confirmations and reinvestment records until three years after you sell the investment and file the return reporting the sale.
Business Assets
Keep purchase records and depreciation schedules until three years after you dispose of the asset and file the return reporting the disposition.
Digital vs. Paper
The IRS accepts digital records. Scanning documents and storing them electronically is acceptable — as long as they're legible, organized, and backed up.
Best practices:
- Scan at 300 DPI or higher
- Use PDF format
- Organize by year and category
- Back up to cloud storage and external drive
- Name files consistently (e.g., "2024_W2_EmployerName.pdf")
Next Steps
If you're unsure what to keep, Alan can review your records and provide specific guidance. He can also help you implement a record retention system that protects you without creating clutter.