Tax Records: What to Keep and What to Toss

Wondering how long you should keep a copy of your Form 1040, W-2, 1099s and other records you used to prepare your 2019 tax return?

Maybe you'll err on the side of caution and keep everything, storing the documents in a shoebox or drawer that's already overflowing with paperwork from tax years past. But there are limits on how long you need to keep documents, and in some cases, you might not need them at all.

For instance, you typically won't have to keep donation receipts from charities if you don't itemize — something fewer people do these days since the standard deduction was nearly doubled. (For the 2020 return, taxpayers who don't itemize will want to keep receipts for charitable donations. That's because the Coronavirus Aid, Relief and Economic Security (CARES) Act allows non-itemizers who donate cash to charity to deduct up to $300 of their gift — $600 for joint filers — on their tax return.)

So, what to save and what to toss?

Many documents should be kept for at least three years — that's how far the IRS will look back on a routine audit. But there are exceptions. For instance, the IRS can go back six years if you underreported your income by more than 25%. And there's no time limit on how far the IRS can look back if you didn't file a return or submitted a fraudulent one.

So, assuming you file returns annually, here's a brief guide to retaining tax records:

Three years. Keep a copy of your return and supporting documents — such as W-2s, Form 1099s, and Form 1098 that reports mortgage interest — for at least three years after the tax-filing deadline. 

Keep records on investments and property you own for at least three years after you sell them. And documentation of Roth IRA contributions should be kept at least three years after depleting the account.

Seven years. You have seven years to deduct losses from worthless securities or bad debts you're unable to collect, so save documents verifying these transactions for at least that long. You can find more information on deducting worthless securities at IRS.gov.

Please note: The contents of this publication provided by ICMA-RC is general information regarding your retirement benefits. It is not intended to provide you with or substitute for specific legal, tax, or investment advice. You may want to consult with your legal, tax, or investment adviser to review your own personal situation. Some of the products, services, or funds detailed in this publication may not be available in your plan. This document contains information obtained from outside sources and it references external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy. In addition, rules and laws can change frequently.

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