Why Record Retention Matters

Understanding which tax documents to keep and for how long is crucial for protecting yourself during audits, resolving disputes, and maintaining proper records. Use this guide to build a robust tax document retention system.

Documents to Preserve Permanently

Critical Personal Records

Store these essential documents in a bank safe deposit box or fireproof home safe, and keep accessible copies at home for daily reference:

• Birth certificates

• Social Security cards

• Marriage certificates

• Divorce and property settlement agreements

• Military discharge papers

• Estate tax returns

• Insurance policies

• Wills and trust documents

Business Formation and Operation Records

Maintain all documentation related to business formation, ongoing operations, and eventual termination indefinitely. This includes incorporation papers, operating agreements, partnership agreements, and dissolution documents. Legal challenges and inquiries often emerge years after operations cease.

Tax Returns and Payment Documentation

Retain copies of all tax returns (personal and business) with proof of payment permanently. Agencies occasionally claim returns were never filed—sometimes reaching back 12 years or more. Keeping both physical and electronic copies offers added security.

Long-Term Record Retention Requirements

Real Estate Documentation

Preserve closing escrow statements (HUD-1) from home purchases and all refinancing transactions until five years after selling the property. Keep receipts, canceled checks, and credit card statements for all improvements until five years post-sale—these increase your cost basis and reduce taxable gains.

Investment and Securities Records

Keep brokerage statements showing purchase dates and prices for all securities until five years after sale. If you reinvest dividends, retain those records as they increase your cost basis and reduce taxable profits. For stock options and ESPP shares, track all investment amounts carefully; corporate mergers can result in lost records.

Retirement Account Documentation

Preserve all documentation for IRA, Roth IRA, and SEP-IRA deposits until accounts are fully depleted. This is critical for nondeductible traditional IRA contributions—those funds remain nontaxable upon withdrawal only if you can prove no deduction was claimed when contributed.

Carried Forward Losses

If you're carrying forward capital or rental losses, retain supporting documentation dating back to the original year these losses were generated. Without it, you cannot substantiate these deductions.

Standard Five-Year Retention Rule

Most other tax-related documents may be securely destroyed after five years. This aligns with audit statutes of limitations:

• IRS: three years from filing date to initiate an audit

• California FTB: four years

• Up to six years if income is significantly underreported

• No limit for fraudulent or unfiled returns

Important Reminders

Social Security Earnings Verification

The Social Security Administration no longer mails periodic statements. Regularly verify online that your earnings are properly credited and address any missing records promptly.