How Many Years Should You Keep Tax Returns? Rules and Exceptions

For most people, keeping tax returns for three years after filing is enough, but how many years you should keep tax returns depends on what’s on them. Six years, seven years, or forever can all be the right answer depending on whether you underreported income, claimed certain losses, failed to file, or still own property whose cost basis the return helps prove. The three-year rule is the floor, not the ceiling.

The Three-Year Default

The IRS generally has three years from the date you filed your return to assess additional tax, and you have the same window to amend or claim a refund.¹ A return filed early counts as filed on the due date, so a 2025 return filed March 1, 2026, starts its clock on April 15, 2026, and runs out in April 2029.²

If your return reported all your income accurately and nothing special applies, three years of retention is enough. That covers the return itself and every document behind the numbers on it.

Six Years If You May Have Underreported Income

Omit more than 25% of the gross income shown on your return and the IRS gets six years instead of three to come back for additional tax.³ Intent doesn’t matter. A forgotten 1099, a missed freelance payment, or a misunderstanding about what counts as gross income can all trigger the longer window.

A separate six-year trigger applies to foreign financial assets: failing to report more than $5,000 of income tied to assets that should have appeared on Form 8938 opens the same extended period.³ If there’s any realistic chance your income was understated, treat six years as the minimum.

Seven Years for Worthless Securities and Bad Debts

If you claimed a loss deduction for a worthless security or a bad debt, keep the records for seven years from the date you filed that return.⁴ These deductions get the longest fixed retention period because the exact year a security became worthless or a debt became uncollectible is often disputed, and the extra time gives both sides room to argue it.

Forever: Fraud and Unfiled Returns

Two situations eliminate the statute of limitations entirely. A fraudulent return filed with intent to evade tax can be reassessed at any time, with no outside limit.³ The IRS has to prove fraud by clear and convincing evidence, but succeeding on even one item opens the whole return indefinitely.

If you were required to file and didn’t, the clock never starts. The IRS can assess tax on that unfiled year at any point in the future.⁵ Every record tied to an unfiled year should be kept until the return is actually filed and the resulting three-year window closes.

Records to Keep as Long as You Own the Asset

Some records don’t fit a year count because the clock doesn’t start until a future event. These you hold until the event happens, then for the usual three years after.

Property and Investment Basis

Any document that establishes your cost basis in an asset stays in your files until at least three years after you file the return reporting the sale.¹ A home bought in 2010, improved in 2015, and sold in 2030 means the 2010 closing statement needs to survive in your files until roughly 2034. Stock and mutual fund purchase confirmations follow the same rule, though brokerages now track basis on shares bought after 2012.

Nondeductible IRA Contributions

Every Form 8606 you’ve filed reporting after-tax contributions to a traditional IRA proves which portion of your future withdrawals is tax-free.⁶ Lose them and you can end up paying tax twice on money that was already taxed. Keep each Form 8606 until all your traditional IRAs are empty and the three-year window on that final return has run.

Gift Tax Returns

Copies of Form 709 and any appraisals attached to them belong in your files permanently. They track your lifetime use of the gift tax exclusion, and the IRS can review prior gift tax returns when examining a later one or an estate return.⁷

Inherited Property

Your basis in inherited property is generally its fair market value on the date the previous owner died. The estate may have reported that value on Form 706 and sent it to you on Form 8971.⁸ Keep that documentation for as long as you own the asset, then three more years after you sell and report the gain or loss.

Loss Carryforwards Extend the Clock

If you carry a net operating loss or capital loss into future years, the records supporting the original loss have to survive until the three-year window closes on the last return that uses it.¹ A capital loss that takes four years to use up means the original documentation stays in your files for at least seven years: four years of carryforward plus the three-year assessment window on the final year.

Records Protect Refunds Too

Retention isn’t only about audits. You have until the later of three years from filing or two years from paying the tax to claim a refund.⁹ Miss that deadline and the money is gone for good, even if you clearly overpaid.

The recoverable amount is capped by the same timing. A claim filed in the three-year window is limited to tax paid during those three years plus any filing extensions; a claim filed in the two-year window is limited to what you paid during those two years.⁹ Three years of returns and payment records is the minimum needed to protect that right.

Employers Have Their Own Rules

If you run a business with employees, the IRS requires you to keep all employment tax records for at least four years after filing the fourth-quarter return for the year. That includes W-4s, deposit records, and EFTPS acknowledgment numbers.¹⁰

Some employment records need six years. Documentation of qualified sick leave and family leave wages for leave taken after March 31, 2021, and employee retention credit wages paid after June 30, 2021, falls into that longer bucket.¹⁰

Keep the Supporting Documents, Not Just the Return

Every retention period applies to the paperwork behind the numbers, not just the Form 1040. W-2s, 1099s, bank and brokerage statements, expense receipts, charitable donation acknowledgment letters, closing statements, and health insurance Forms 1095 all need to live as long as the return they support.¹

In an audit, the burden of proof is yours. You’re responsible for substantiating the income, deductions, and credits on your return, which means producing receipts, statements, or other documentation.¹¹ If you can’t, the IRS typically disallows the item. Travel, entertainment, and vehicle expenses require contemporaneous logs on top of receipts. A return without its supporting evidence lets the auditor recalculate the tax bill with little to push back against.

Digital Storage Is Fine, With Conditions

The IRS accepts digitized records in place of paper. Scans have to be legible enough that every character is unambiguous, the storage system needs controls against unauthorized changes, and the indexing has to let individual records be found quickly.¹² You can destroy the paper originals once you’ve confirmed the digital copies are complete and readable, but you also have to be able to produce hard copies on request during an audit. Cloud storage, an external drive, or a scanning app all work as long as the files stay accessible and readable years from now.

State Returns Follow Their Own Timelines

State and local tax authorities set their own retention requirements, and they don’t always match the federal rules. Most states use a three-year window similar to the IRS, but some require four to seven years. Check with your state revenue department before shredding anything, since a state audit can arrive after the federal clock has already run out.

1
Internal Revenue Service. How Long Should I Keep Records?
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Internal Revenue Service. Time IRS Can Assess Tax
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Office of the Law Revision Counsel. 26 U.S. Code 6501 – Limitations on Assessment and Collection
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Internal Revenue Service. Publication 583, Starting a Business and Keeping Records
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Internal Revenue Service. Help Yourself by Filing Past-Due Tax Returns
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Internal Revenue Service. About Form 8606, Nondeductible IRAs
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Internal Revenue Service. Instructions for Form 709 (2025)
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Internal Revenue Service. Instructions for Form 706 (Rev. September 2025)
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Internal Revenue Service. Time You Can Claim a Credit or Refund
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Internal Revenue Service. Employment Tax Recordkeeping
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Internal Revenue Service. Burden of Proof
12
Internal Revenue Service. Rev. Proc. 97-22