We all have that friend who hangs onto every single piece of paper that has ever entered their mailbox. Or… maybe you are that friend. 

If so, I am most certainly not going to tell you to take it easy on the hoarding. In fact, you’re probably more prepared than your San Antonio & Texas Hill Country neighbors to handle an audit or claim a missed refund.

While many tax software programs or blogs suggest keeping tax returns for a few years, the reality is often more complex. The length of time you should keep a tax return depends on various factors, including potential audits, tax claims, and property transactions. Before locking in how long to keep tax documents, you should know the reasons why you need to hang on to them.

• Be prepared for a potential audit. The IRS can audit your tax returns for up to three years. In some cases, this period can extend to six or even seven years. Lack of documentation is one of the disputes that IRS auditors can/will always win if you can’t prove your numbers.
• Claim a missed refund or credit. If you have a feeling you’ve missed out on a potential refund or credit on your last tax return, there could still be time to claim what you are owed. In order to do this, however, you’ll need to reference the past tax return in question.
• Evaluate property transactions. If you’ve bought or sold property (a local San Antonio & Texas Hill Country property or one you own somewhere else), your tax records can be crucial for calculating capital gains or losses. 

To know exactly how long to keep tax documents, you’ll need to first understand exactly what you’re up against. Here’s a breakdown of how long to keep tax documents based on different scenarios…

• General Tax Returns: Keep your tax returns for at least three years. This covers most standard tax situations and is the basic rule for both tax returns and other tax documents. 
• Amended Returns or Claims: If you’ve filed an amended return or claimed a refund, keep your records for three years from the date you filed the original return or two years from the date you paid the tax, whichever is later.
• Unreported Income: If you’ve failed to report income exceeding 25 percent of your gross income, the IRS can audit you for up to six years. Keep your records for this period.
• Fraudulent Returns: If you’ve filed a fraudulent return, the IRS can investigate indefinitely. You’ll want to keep your records basically forever if this applies to you (though I hope it doesn’t). 

Aside from issues that you may run into with the IRS, there are plenty of other reasons to keep a stash of tax documents and past returns. Your insurance company, for example, may require tax records to verify losses or damages. Or if you’re applying for a loan, lenders often ask for tax returns to assess your financial history. 

Tax returns or records can also provide crucial financial information in case you find yourself in a legal dispute. 

Obviously you want to be able to produce the necessary documents in a timely manner in any of these scenarios, to save yourself time and stress.

Okay, all of this is well and good if you have been practicing good document storage. 

But if you’re not that person who hangs onto past tax documents, I hope I’ve convinced you to start. And if you’re not sure where to start, here are a couple of best practices for you…

1. Try storing your files digitally. Use secure cloud storage or external hard drives to store digital copies of your tax returns.
2. Keep hard copies safe. If you prefer physical copies, store them in a fireproof safe, or secure location.
3. Organize, organize, organize. Create a filing system that allows you to easily find specific documents in a timely manner.
4. Give me a call. If you’re unsure about how long to keep specific records or best practices for doing so, I can point you in the right direction: (830) 331-9218

It’s more than okay to hang onto those tax documents, even for years, as long as you keep them organized. And knowing how long to keep tax documents can help you protect yourself from potential legal and financial risks. 

And of course, call me (your helpful San Antonio & Texas Hill Country tax problem solver) if you aren’t sure exactly how long to keep those tax documents, or which of them you’ll need to get through a sticky situation with the IRS. 
(830) 331-9218

To building your tax paper trail, 

Michael Essick