How Long Should You Keep Your Tax Records?

Forever: That's how long you should retain your tax returns. If the IRS claims you never filed a return for a particular year, it can assess tax at any time unless you can prove that you did file. So, it's better to be safe than sorry. What about supporting records? Usually, six years is adequate. While the IRS generally has just three years from the date you file your return* to assess tax for that year, the assessment period jumps to six years if gross income is substantially understated. Once again, it's better to be cautious.

Records of property transactions, such as house and securities sales, should be kept with the return reporting the transaction. You'll also need to keep the records showing the property's cost (or other basis) with the return, since gain or loss is measured by comparing the selling price to the property's basis.

The chart below shows the period of time in which the IRS can assess additional tax or you can amend your return to claim a credit or refund. Since most states extend the statute by one extra year, however, we recommend that you add a year to the periods listed below.

*Returns filed before the due date are treated as being filed on the due date.

If you . . . .	Then the period of limitation is . . . .
1) Owe additional tax and 2), 3), & 4) do not apply	3 years
2) Do not report income that you should, and it is more than 25% of the gross income shown on your return	6 years
3) File a fraudulent return	No limit
4) Do not file a return	No limit
5) File a claim for credit or refund after you filed your return	2 years after tax was paid
6) File a claim for a loss from worthless securities	7 years