Let me start today by sending out my thoughts and prayers to those devastated by the flooding in Kerr County and other parts of Central and South Central Texas. The destruction alone is incredibly hard to see..
But maybe what hits so close to home is the loss of the young lives at Camp Mystic… I keep thinking about those parents and what they’re going through right now… heartbreak is the only way to characterize it. I’m gathering the ones I love a little closer and hoping these families are able to find comfort in their loss.
If you’re wanting to help, here’s a list of organizations accepting donations. Even small things strengthen those facing such difficulty.
Now, there’s no easy way to transition to taxes from something so heavy, but the news from Washington is “big”. The House passed Trump’s “One Big Beautiful Bill Act” (OBBBA) on Thursday, and Trump signed it into law on Friday. We’ve been keeping an eye on this as it’s developed.
And now? It’s game time. Because this bill impacts your real-life decisions. Waiting until tax time to think about what it means for you? That’s too late.
In my upcoming writings, I’ll talk more about what this new law means for your financial and tax standing. Until then, here’s a topic I try to hit on regularly because I often hear my Milwaukee clients ask about it.
And know, if you file your taxes with me, I keep a record of things in the The Neal Group, LLC secure database beyond the scope of what I’ve laid out here. But this is what I *generally* advise (bear with me as this one’s a bit longer with some detailed checklists)…
The Neal Group, LLC’s Guide to How Long To Keep Tax Returns
“I realize there’s something incredibly honest about trees in the winter, how they’re experts at letting things go.” —Jeffrey McDaniel
Quick Summary: How Long to Keep Tax Returns
- Most tax documents only need to be kept for 3 years, but some need longer — and a few should be saved permanently (I break it all down clearly by type).
- Yes, you can shred a LOT — like utility bills, old ATM slips, and anything past its useful life or already available online
- Keeping the right records = bigger deductions and less audit stress. I’ll show you exactly what’s worth saving.
- Own a business or side hustle? There are special retention rules for contracts, payroll, receipts, and mileage logs.
- A clean tax file makes filing faster, easier, and more accurate — and I’ll walk you through how to set it up.
That overflowing file drawer? Let’s tame it.
You know the one… stuffed with years-old envelopes, scattered 1099s, and a few W-2s (bearing accidental coffee stains). It’s home to all your “just in case” tax paperwork.
But here’s the truth: keeping everything “just in case” isn’t helping you. It might actually be hurting your ability to prep accurately and find deductions. And, it puts you at greater risk if the IRS ever comes knocking on your Southeastern Wisconsin front door.
Which is why today, I want to talk about how long to keep tax returns (and what to toss) – so your tax situation is organized AND protected.
Why This Matters (Seriously)
If you’ve ever been through a tax audit (or even thought you might be) you already know how important your records are. But here’s what most taxpayers don’t realize: The IRS has time.
By law, they can audit returns up to 3 years after filing. If they suspect substantial underreporting (25 percent or more), that window jumps to 6 years. And if fraud is suspected? There’s no limit.
Also, being disorganized can be costly. Lost documentation can mean disallowed deductions, interest, and penalties. And that’s not counting the time it takes to recreate records under pressure.
For another thing, your stress level matters. Imagine being able to grab exactly what you need at tax time without tearing your house apart. Organization makes filing faster and less error-prone.
Another big motivator here: you could be leaving money on the table. Missed deductions due to poor recordkeeping (especially for things like charitable giving, education expenses, home improvements, and medical costs) can cost you hundreds, even thousands each year.
What Tax Records Should You Keep?
You don’t need to keep everything. Just the right things. Here’s what to hold onto:
- Proof of income and expenses: W-2s, 1099s, K-1s, brokerage statements, rental income records
- Receipts and documentation for deductions: Charitable donations, property taxes, medical bills, business expenses, child care costs
- Mortgage interest statements (Form 1098)
- Retirement plan contributions (Form 5498) and IRA rollovers/distributions (Form 1099-R)
- Health insurance (Form 1095-A/B/C)
- Records of home improvements (for basis adjustments when selling)
- Documentation of stock purchases and sales (dates, amounts, and cost basis)
- Tax return copies (at least the last 7 years — often helpful when amending returns or applying for loans)
- Vital documents: Social Security cards, marriage licenses, divorce decrees, military discharge papers, etc.
📌 The IRS puts it plain and simple: Keep records that support items shown on your return.
How Long to Keep Tax Returns
This is where a lot of clutter starts. Let’s simplify it:
Basic Guideline: 3 Years
The IRS generally has three years from your filing date to audit your return or assess more tax. If you file early, it still counts as being filed on the due date, including any extensions.
If you ever need to amend your return to claim a refund or credit, you usually have three years from when you filed or two years from when you paid any tax due — whichever is later.
Because of these overlapping timeframes, the IRS recommends keeping all related records for a minimum of three years. That way, you’re covered if the IRS follows up or if you find a missed tax break later.
Longer Than 3 Years
- If you underreported income by 25 percent or more, the IRS has up to 6 years to assess additional tax.
- If you didn’t report 5K or more in foreign financial assets, the IRS also has 6 years to audit and assess tax.
- If you’re dealing with bad debt deductions or losses from worthless securities, the window to claim a refund or credit is 7 years.
- If you’re claiming the foreign tax credit, you may need to keep documents for up to 10 years.
- If you didn’t file a return, there’s no statute of limitations. The IRS can assess tax at any time, so keep those records indefinitely.
- If the IRS suspects fraud or intentional errors, there’s also no time limit on their ability to review or assess tax. Holding onto your documentation can help defend your return if questioned.
- Keep W-2 forms until you retire — they can help verify lifetime earnings if Social Security data is ever off.
Special Rules for Business Owners and Gig Workers
If you run a business or have a side gig, the rules change a bit for you:
- Payroll records: Keep for at least 4 years
- Receipts for business expenses: 7 years minimum
- Client contracts or agreements: While active + at least 4 years
- Mileage logs and vehicle expense records: For every tax year they’re claimed
State Tax Caveats
When it comes to hanging onto your state tax documents, the rules can vary quite a bit (depending on where you live). Unlike the IRS, which generally has a three-year window to audit returns, some states allow for a longer look-back period.
The safest move? Hold onto your state tax records for at least four to five years — or longer, if your state recommends it. Every state has its own rules, so it’s worth checking with your local tax authority to be sure.
Investment & Property-Related Documents
- For property like a home or rental: keep the purchase price, records of capital improvements, and any documentation for depreciation (for rentals or business use) until at least 3 years after you sell or dispose of the asset, since they affect gain/loss calculations.
- For investment assets (e.g., stocks or bonds): Keep all records tied to basis, purchase dates, and sales for at least 3 years after the year of sale.
- For IRAs, 401(k)s, or other retirement accounts: Keep contribution and withdrawal records for at least 3 years after the account is fully distributed.
What to Shred
Now that you know what to keep… here’s what to say goodbye to:
- Old ATM/deposit slips after verifying with statements
- Paid utility bills, credit card statements, and bank statements — if available digitally
- Receipts for non-deductible personal items
- Documents beyond their IRS-suggested time frame
- Expired warranties or insurance paperwork
- Pre-approved credit offers
- Sticky notes with login info or Social Security numbers
- Loan docs for debts you paid off more than 7 years ago
Important: If you’re tossing documents with sensitive info, shred them. DON’T just toss them in the trash.
Go Digital and Back It Up
Digital records are easier to find and MUCH harder to lose when the unexpected happens. Plus, they make your tax pro’s life a whole lot easier (wink wink).
And yes, the IRS does accept electronic copies of documents as valid proof, as long as they’re accurate and readable.
Make sure to:
- Store your files securely in cloud storage or encrypted external drives
- Use clear naming conventions
- Back up your digital records (ideally in two places)
- Scan paper documents when received. Don’t wait for the pile to grow
FAQ (Because You’re Not the Only One Asking…)
“I found old tax records from the early 2000s. Should I still keep them?”
Only if they relate to an asset you still own (like real estate, stocks, or a retirement account). If not, and if there’s been no audit or amended return activity tied to them, you can shred them safely.
“What if I file electronically? Do I still need to keep all the paper documents?”
If you file electronically, you still need to keep any supporting documents (receipts, statements, records) used to prepare the return. These don’t need to be paper — scanned or digital copies are fine as long as they’re legible and complete.
“I have a mix of personal and business expenses on the same credit card. How do I organize that?”
That’s a big red flag for the IRS. At the very least, highlight or note each business-related expense and document the business purpose. Going forward, separate your personal and your Milwaukee business accounts completely to bring down your audit risk and simplify your recordkeeping.
“How should I organize my files, by year or by category?”
Both methods work, but the most effective is a hybrid system. Set up folders by tax year, and then break those down by category: income, deductions, investments, property, etc. This mirrors how returns are built and makes finding the documents you need much faster.
“I lost a document. Can I still file?”
Yes, but it’s risky. Try to request a duplicate (from your bank, employer, etc.) or reconstruct as much as possible. Some info (like past W-2s) can be retrieved through your IRS transcript.
“Are there apps or tools you’d recommend for managing tax documents?”
Absolutely. Tools like Shoeboxed, SmartVault, and Dext can help you scan, tag, and store receipts and tax docs digitally. Just make sure whatever app you use offers encryption and backup features. And if you use cloud storage (like Google Drive or Dropbox), enable two-factor authentication.
When your records are in order, everything about your taxes gets easier: filing, deductions, audits (perish the thought), and even applying for mortgages or student aid. And if your tax document situation currently resembles the aftermath of a small tornado, don’t worry. I can help you with the cleanup. Just grab a time on my calendar:
414-325-2040