I’m a Tax Expert: 3 Records You Should Keep Indefinitely Once Your Taxes Are Filed
Written by
Kerra Bolton
Edited by
Amber Barkley
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While it could be tempting to throw away documents after filing tax returns, doing so could put you at financial and legal risk. Maintaining certain financial records indefinitely can safeguard against future tax disputes, facilitate asset management and ensure compliance.
“It is important to keep documents that affect future years forever, such as documents related to losses that have created carryovers, agreements and investment records, which may create future cash basis,” said Crystal Stranger, senior tax director and CEO of Optic Tax.
While the IRS provides guidelines on the minimum duration for retaining various documents, GOBankingRates spoke to two tax and financial experts to explore three records you should keep indefinitely once your taxes are filed.
Filed Tax Return Copies
Individuals should keep copies of their filed federal and state tax returns even for years after they’re filed.
“General tax return documents should be kept at least three years,” Stranger said. “But it can be good to keep records for seven years, because the IRS could go back that far if there are certain types of underreported income or fraud.”
These documents serve as a historical record of an individual’s income, deductions and tax payments.
“If you get rid of tax records and then later need them, you will not have what you need to substantiate your deductions or credits,” Stranger explained. “This can cause a loss or reduction in allowed deductions, and you could end up owing taxes.”
Property and Real Estate Records
Documents related to property ownership, such as deeds, titles and records of significant home improvements, should also be kept.
Joe DiSanto, a financial advisor and fractional CFO, said, “These costs go towards what’s called your basis.”
DiSanto explained, “That inevitably comes into play when you sell the property. You’re going to calculate your capital gains tax. If you’ve done investments or improvements into the property and you want to essentially take those deductions against capital gains, you’re going to need backup for that work.”
DiSanto said keeping such records is especially important for taxpayers who have lived in their homes for 10 or more years. He pointed out that, by the time you sell your house, any work you did on it could have been a long time ago.
“You want to have those receipts or invoices or whatever so that you can substantiate that work if you need to,” he explained.
Retirement and Pension Documents
Keep all records related to retirement accounts, including traditional and Roth IRAs, 401(k) plans and pension plans.
This includes documents detailing contributions, rollovers and distributions. These documents are essential for tracking tax-deferred contributions and required minimum distributions, ensuring compliance with IRS regulations.
“If you think you made a contribution to your traditional IRA, but it got flagged in a Roth, you might want some backup documentation to support your claim if something happened down the road,” DiSanto said.
He said taxpayers should document and attach retirement savings contributions to their tax returns and supporting documents like W-2s or 1099s. He explained that doing so ensures that all of one’s transactions in a given year are validated.
“Put it in the same folder with all of those documents and just keep it,” DiSanto said. “It doesn’t hurt. It doesn’t take up much space anymore.”
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