How long should you retain your financial and tax documents? The IRS offers guidelines without drawing hard and fast rules. The general rule of thumb is to keep taxes and relevant information for a minimum of 3 years and, in some cases, for as many as 7.
- In the event that Uncle Sam audits you because you might owe additional taxes, be prepared to show 3 years of documentation.
- However, if you do not report income that accounts for more than one quarter of the gross income indicated on the return, you may need to have 6 years of records accessible.
- If bad debt or a loss from securities is reported, 7 years is the time frame.
- And if you own a business and have employee tax records, keeping them for at least 6 years from the time of filing is recommended.
Before you throw out the old, ask yourself if any of the paperwork might be useful for non-IRS reasons. And when in doubt, hold on to it for 7 years.