The IRS generally has three years to audit a return — six if income was substantially understated, and forever if a return was fraudulent or never filed. Your retention schedule should assume the long cases. Here's ours.
Keep permanently
- Tax returns themselves (the filed forms, all years)
- Records for property you still own — purchase documents, improvement receipts (they set your basis at sale)
- Business formation documents, corporate minutes, stock records, contracts in force
- Retirement account basis records (nondeductible IRA contributions — Form 8606)
- Estate, gift and inheritance paperwork
Keep seven years
- Supporting documents for filed returns — W-2s, 1099s, K-1s, receipts, mileage logs, charitable acknowledgments
- Bank and credit card statements, canceled checks
- Records of sold investments and closed accounts
- Payroll records, employee files (post-departure), sales records and invoices
Keep three to four years
- Routine business correspondence, expired insurance policies, interim statements superseded by year-end versions
Digital counts
The IRS accepts legible electronic records. Scan everything, back it up in two places (one offsite or cloud), and shred the paper you no longer legally need — identity thieves love tax documents. For clients, our portal doubles as an always-available archive of returns we've prepared.
The audit you never planned for is won by the receipt you almost threw away.