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We have been getting this question a lot recently, and since many of my blog post ideas come directly from conversations with our clients, I’m using that inspiration again for this week’s topic. 😊

It’s springtime 🌷🧹 — which means many people are cleaning out closets, garages, basements, and of course… those overflowing file cabinets filled with old tax returns and paperwork.

But before you start shredding everything in sight… ✂️📦
Not so fast when it comes to tax documents!

The IRS actually has guidelines on how long you should keep your records, and the answer is:
👉 It depends on the type of document and the situation involved.

No matter what the question, we accountants like to say “it depends” and use caution.  We recommend keeping most tax related records for 5-10 years…”I’m a belt and suspenders gal”, but you may need to keep some records much longer (see IRS recommendations below).  When discarding of any personal records please be cautious and shred any documents with “sensitive” information.  You can contact a local shredding vender who can pull up outside your home with a truck and properly destroy your documents, which includes bank statements and cancelled checks.

 According to the IRS:

“The length of time you should keep a document depends on the action, expense, or event which the document records.”

In general, you should keep records that support income, deductions, or credits claimed on your tax return until the IRS “period of limitations” expires.

📌 So What Is the “Period of Limitations”?

This is the amount of time during which:

• You can amend your tax return to claim a refund or credit 💰
• OR the IRS or your state can assess additional tax 📬

Generally, the clock starts running from the date the return is filed.
(And returns filed before the due date are treated as filed on the due date.) Don’t forget extensions and late filing extends the statute of limitations.

🧾 General IRS Record Retention Guidelines

✅ Keep Records for 3 Years

This is the standard rule for most taxpayers if special circumstances do not apply.

✅ Keep Records for 3 Years or 2 Years After Tax Was Paid

Whichever is later, if you file a claim for credit or refund after filing the original return.

✅ Keep Records for 7 Years

If you file a claim involving:

• Worthless securities 📉
• Bad debt deductions 💸

✅ Keep Records for 6 Years

If you underreported income by more than 25% of the gross income shown on your return (is anyone really admitting to this?)

✅ Keep Records Indefinitely

If:

• You did not file a tax return 🚫
• You filed a fraudulent return ❌

✅ Employment Tax Records

Keep these for at least:

• 4 years after the tax becomes due or is paid, whichever is later 👔📋

🏠 What About Property Records?

This is an area many people overlook.

If your records relate to property, you generally should keep them until the period of limitations expires for the year you dispose of the property.

Examples include:

• Purchase documents 🏡
• Closing statements
• Capital improvement records 🔨
• Depreciation schedules
• Inheritance documentation

These records help determine:

• Gain or loss on sale
• Depreciation deductions
• Basis calculations…these records can help reduce your tax liability

⚠️ Important Reminder:
If you received property in a non-taxable exchange, you may also need records from the old property to support the basis of the new property.

📂 Don’t Forget About Non-Tax Reasons to Keep Documents

Even if the IRS no longer requires records, other organizations might.

You may need documents for:

• Insurance claims 🛡️
• Mortgage applications 🏦
• Loan approvals
• Legal matters ⚖️
• Retirement planning
• Estate administration

💡 A Few Practical Tips

✔️ Keep copies of filed tax returns permanently in a digital format for at least 10 years
✔️ Scan important documents electronically ☁️
✔️ Back up digital files securely
✔️ Shred sensitive documents before disposal 🔒
✔️ When in doubt… ask your CPA before tossing specific records 😄

🧠 Final Thoughts:  Spring cleaning feels great… until you realize you accidentally shredded something important! 😅 A little organization today can save a lot of stress later — especially if the IRS, a bank, or your insurance company ever asks for documentation years down the road.  As always, every situation is different, so if you are unsure what records you should keep (or toss), speak with your tax advisor before cleaning out those files. 📁✨

👉 Seems like this is another call to action, no more wishful thinking, let’s not say “I wish I had…”,  and as always…

Feel free to search our website for some of our complementary resources or get in touch:  Contact us if you have tax concerns, tax minimization questions or want to discuss the next steps for your business success and financial goals.  Use our search box for those posts specific to tax minimization, business planning, business best practices, casualty losses, etc. and see what “pop’s” up.

IRS Source:  IRS Record Retention Guidelines