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Key takeaways
- The IRS generally has three years from the date you file to assess additional tax — but six years if you left out more than 25% of your income, and no limit if you never filed.
- Records for property and investments should be kept until the period closes for the year you sell them.
- Employment tax records must be kept at least four years.
- Digital copies are acceptable if they're complete, legible and retrievable.
Keeping records isn't just about audits. It's how you prove your cost basis when you sell a building, show a lender your income, or respond to a notice about a year you've long forgotten. The question is how long "long enough" really is.
The look-back periods that matter
| Situation | How long the IRS can generally assess tax |
|---|---|
| Normal return | 3 years from the later of the filing date or the due date |
| You omitted more than 25% of the gross income shown on the return | 6 years |
| Claim for a loss from worthless securities or bad debt | Keep records 7 years |
| You didn't file a return | No limit |
| Fraudulent return | No limit |
Two practical implications. First, "three years" is counted from when you filed, not from the end of the tax year — so records for a return filed on an October extension need to be kept longer than you might assume. Second, since it's hard to know in advance whether you'll ever face a six-year question, many advisers use seven years as a simple default for everything except property records.
Also keep your records long enough to cover your own rights. You generally have three years from filing (or two years from paying, if later) to claim a refund by amending a return.
Business-specific records
Assets and property
Keep purchase documents, improvement records and depreciation schedules for as long as you own the asset, plus the look-back period for the year you sell or dispose of it. That can mean holding real estate records for decades. The same logic applies to investments: keep proof of cost basis until the sale year is closed.
Payroll
Employment tax records — wages paid, withholding, W-4s, payroll returns — should be kept for at least four years after the tax is due or paid, whichever is later.
Entity documents
Formation documents, operating or shareholder agreements, S-corp election letters, EIN confirmations and ownership records should be kept permanently.
Returns themselves
Keep copies of filed returns indefinitely. They're small, and they're the fastest way to answer questions about carryovers, basis and prior elections years later.
Paper vs. digital
The IRS accepts electronic records as long as they're accurate, complete, legible and can be produced when requested. Scanning receipts and shredding the paper is generally fine if the scan is readable and your system can retrieve it by date, vendor and amount.
A few cautions:
- Thermal-paper receipts fade. Scan them promptly.
- Bank statements alone aren't always enough. They prove you paid, not what you bought or why. Pair them with receipts or invoices, especially for meals, travel and gifts.
- Software subscriptions end. If your records live in an app, export them each year in a format you'll still be able to open.
A storage system that works
- One folder per tax year, with subfolders for income, expenses, assets, payroll and the filed return.
- A permanent folder for entity documents, property purchases and prior-year returns.
- Capture at the source. Snap receipts when you get them and forward emailed invoices to one inbox, rather than collecting them at year-end.
- Back up in two places, at least one of them off-site or in the cloud, with access controls.
- Set a yearly purge date — but only for years clearly past every applicable look-back period.
The ExcelTax Vault stores every return, receipt and workpaper for seven years by default, indexed to the line on the return it supports. If a letter ever arrives, the answer is already filed next to the question.
This article is general information, current as of September 2026, and isn't tax advice for your situation. Figures are federal unless noted, and indexed amounts change each year — confirm current numbers with your tax pro before acting.