After filing your tax return, do not close the book on your taxes until you have set up next year’s files, purged unneeded old records, and prepared your records in case of an audit. Before you close this year’s tax file, there is still some work to do. If the IRS or state revenue department selects your return for review, preparation is critical. What you need to do now is think about tax record retention. Here are some tips.

Five tips for tax record retention

1. Keep a copy of your Form 1040 indefinitely. Do not toss or destroy any of your 1040s. You may need them to correct historic Social Security earnings statements or to prove that you filed a tax return.
2. Retain supporting documents for a minimum of three years. You must keep records to support your tax return (i.e., W-2s, 1099s, K-1s, receipts, canceled checks, bank statements, and mileage logs) for a minimum of three years from the later of the tax filing due date, the date you filed your taxes, or the date you paid your tax in full. This approach ensures that your records are available in case of a potential IRS audit.
3. Hold onto property and investment records even longer. To prove your cost basis and taxable gain or loss, all documents relating to property that you own (your home, rental properties, stocks, bonds, and other investments) need to be kept for at least three years after it’s sold or disposed of.
4. Be mindful of other record retention requirements. The three-year period is the federal guidance for standard returns. Other considerations include:
   • State record retention requirements (often six months to one year longer)
   • Requirements for insurance, banking, or estate management
   • Additional federal requirements for tax returns, including unreported income (six years), worthless securities (seven years), or bad debt (seven years)
   • No audit time limit for fraudulent returns
5. A specific filing system is not a requirement, but organization is key. The ability to easily find your documents in the event of an audit will make the process much simpler. Here are some tips:
   • File records by year rather than income or deduction type
   • Within the file, order your records to match the flow of the Form 1040
   • Consider scanning your files to create a digital file as a backup
   • Create 2025 files now to save documents for the current year
   • Shred old documents; don’t just throw them away

Next steps when tax season ends

If you are unsure whether to retain or shred something, keep it unless you know the document can be replaced. As always, feel free to contact our RRBB advisors if you have any questions.