How Long Do I Need to Keep My Tax Records?

Tax Planning

One thing that annoys me about our home office is the sheer amount of paperwork we have filed (and semi-filed, you know the whole stuff it in the cabinet system, right?) and stored. One of our goals before the year is over is to FINALLY get the home office organized and that means getting our filing system in order.

Before we throw out old documents and clean out the room, we need to know what to keep (and for how long) and what we can shred, especially when it comes to our tax records.

Tax Records
Tax Records

How Long Should We Keep Tax Records?

I decided to check the IRS guidelines first.  The gist of their guidelines is that you only need to store records for as long as the period of limitations applies. For example, that means that if there is still time for you to amend one of your tax filings, you should keep the records for that tax year.  The period of limitations is the period of time in which you can amend your tax return to claim a tax credit or tax refund or that the IRS can assess additional tax.

The IRS also has different timetables, depending on your circumstances as follows:

Period of Limitations

IF you… THEN the
period is…
1 Owe additional tax and
(2), (3), and (4) do not
apply to you
3 years
2 Do not report income that
you should and it is more
than 25% of the gross
income shown on your
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
The later of 3 years or 2 years after tax was paid.
6 File a claim for a loss from
worthless securities
7 years

I should also note that even though you may not need to keep these records for tax purposes, please check to see if you need them for some other financial or legal reason.

How to Store Tax Records

As I reviewed the IRS guidelines, I noticed that they did not specify a particular method on how to store your records. That means that if you prefer, you can keep an electronic back up of your tax records. You can also keep them in the traditional paper form as well, it’s up to you.

If you’re trying to explore some options for digital storage here are a few you may want to check out:

  • Scan/Save: The easiest way to save and store that data is to go ahead scan and save the copies. You can put it on an external hard drive where you can store in a secure place.
  • DropBox: They specialize with digital storage and have several plans available including free, professional, and team accounts.
  • Amazon CloudDrive: Amazon also has a digital storage service that is free for the first 5 GBs.

Of course, you have to weigh which options would be best for you and your organizational needs. Since much of these records have sensitive financial information, please make sure whatever you choose is secure.

Thoughts on Storing Tax Records

For us that means we’ll be spending a weekend getting our financial records stored in a secure spot while shredding all of our old stuff from college. Hopefully it’ll only be a weekend project and we’ll have more space available to rearrange everything in our office next month.

I’d love to hear from you about how your filing system is done at home? How long do you keep your records (tax related and not)? Do you have electronic filing as a part pf your system? Why or why not?

Comments (3) Leave your comment

  1. Dear Ms. Elle,

    Your advice to electronically store tax records on an external drive is spot on. If the tax records are stored on the hard drive of a computer, anyone with spyware can download those records from your computer and have complete access to your social security number, name, address, etc. Good job!

  2. At the start of the new year, this is a great article to review. Elle did a great job outlining the basics. If you have concerns about your record keeping requirements, you can also visit or speak to your tax professional.

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