How long do you need to keep tax documents?
Don't plug in the paper shredder just yet.
Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission.
Once tax season is done and over with, you might be tempted to dispose of your W2s, 1099s, and other tax-related documents. Spring cleaning is nearly upon us, after all.
Not so fast. Before you toss that stack of paper away, you might need to hold on to records longer. In fact, the IRS has specific guidance on exactly how long to keep certain documents. Read on to learn what documents to file away, recommendations for digitizing paper versions (plus some tax software that will do the job for you), and how to dispose of tax documents properly.
What documents do you need to file away—and for how long?
According to the IRS, how long you need to hold onto something depends on the particulars of that document. It might show evidence of your income or support the fact that you're eligible for a credit or deduction.
For the most part, you should hold onto a document until the period in which you can make changes to your return or claim a refund or credit has passed. Same goes for the window that the IRS has to figure out whether you owe additional taxes.
If you don't hold onto a document, it might bite you later should you need to file an amended return. Here's how long you should keep your tax documents:
3 years: Generally, you should hold onto your tax documents for three years. Calculate this based on the date you filed. If you claimed a credit or refund, you might only need to keep them for two years—whichever is later. "Taxpayers should keep in mind that returns are filed in the subsequent year,” points out Helena Swyter, a CPA and founder of SweeterCPA in Chicago, Illinois. "For example, documents from 2020 would have been reported on a tax return due May 17, 2021—the pandemic-extended deadline," Swyter says. "These documents should then be retained until 2024—three years after the return was filed."
4 years: Any records related to employment taxes should be held onto for at least four years. Think W-2s, 1099-Ks, and 1099-NECs.
6 years: Should you find yourself in a situation where you're not reporting income that you should report, and that income is more than 25% of your gross income, the IRS recommends holding onto related documents for six years.
7 years: If you've filed a claim for a loss from worthless securities or bad debt deduction, hold onto those records for seven years from the date you paid the tax bill or filed your return.
Indefinitely: If you did not file a tax return, or if you filed a fraudulent return, then you'll need to hold onto your tax documents for an indeterminate amount of time. Additionally, if the tax documents are linked to your property, such as real estate holdings or virtual currency, you'll need to keep them until the period of limitations is up. This would be for the year in which you dispose of the property. Why's that? Well, you'll need them to determine any depletion, deduction, depreciation, or amortization to figure out the gain or loss during your sale.
What do you do with all that paper clutter?
In our day and age, there's no reason why you shouldn't create digital versions of your documents pertaining to your taxes. Paper takes up space, fades over time, and is subject to discoloration. And a spilled glass of water could land you in trouble. Best of all, once you digitize the physical version, it's safe to throw away paper copies.
To begin with, choose a tax software to help you stay organized. While digitizing requires concerted effort, there are a handful of tax software platforms that can help you safely store digital versions:
Paid versions of TurboTax—Deluxe, Premier, Self-Employed, TurboTax Live and TurboTax Live Full Service—include My Docs, a feature where you can safely upload documents. It will store up to seven years of prior tax returns you have on file. Plus, TurboTax's free mobile app enables you to snap photos of receipts and tax forms, which are uploaded and securely stored.
File your taxes with H&R Block online, and it’ll store your tax returns for six years. With its Tax Prep and File app, you can snap a photo of your W-2 or other tax documents with your phone. From there, H&R Block will send a secure link. The MyBlock app also allows you to upload receipts, donations, and other tax-related documents year-round.
TaxAct will save your tax return, which you can archive or print at a later date. TaxAct's free mobile app can also organize and store digital copies of tax returns. Come tax time, you'll have the documents tucked away on the app.
Once you've digitized your records, keep these financial documents safe and secure. Of course, proper security when archiving tax documents is of utmost importance, points out Akieva Ellis, a certified public accountant, certified financial planner, and financial education specialist at Ballentine Partners. If you have files saved to a hard drive or personal device, make sure they're encrypted. Strong password protection serves as another layer of defense. "The more characters and greater diversity of characters used, the better," Ellis says.
If uploading sensitive data and documents to a cloud-based platform, do your part to make sure the platform employs strong security practices. Look out for precautions such as two-factor authentication.
If you prefer to hold onto physical copies, Ellis suggests protecting any sensitive paper documents by storing them in a safe, secure place that isn't easily accessed. "You may also opt to use a fireproof safe as an added layer of protection," Ellis says.
Finally, create a file naming system. Like any recordkeeping system, digital records are only useful insofar as you can access the document you need when it’s needed, Swyter points out. In turn, create file names with respective dates. Plus, have separate folders for different years, and even different categories. "This will help keep documents from the same tax year together in case they are ever requested by the authorities," Swyter says.
How do you safely dispose of your documents?
The beauty of creating digital copies is that you don't have to hold onto physical versions. "Any such record—Forms W-2, 1099, etc.—can be kept digitally as long as it can be reproduced as needed and requested by tax authorities," Swyter says. "In other words, if you have an electronic copy of your 1099-INT showing your annual interest income that you could print out otherwise and transmit to the IRS if needed, you no longer have need for the physical copy the bank may have sent in the mail."
When getting rid of sensitive physical documents, it's best to shred them so that it's harder to piece them together should anyone find them, Ellis recommends. At Reviewed, we put a number of the best paper shredders to the test. The Tru Red Micro-Cut handled nonstop activity for five minutes, and readily took on up to 12 sheets at once, not to mention staples and paper clips.
"When disposing of digital files, make sure to clear any locations where your system may have saved backup copies of the file," Ellis adds.
You'll also want to keep in mind that certain tax documents cross-over to other areas of your life, and you might need to hold onto them for other purposes, Swyter says. "For example, a business insurance provider may want certain employment tax records," she explains. "Be sure to check those relevant retention guidelines before disposal."
Prices were accurate at the time this article was published but may change over time.