Payroll Records: How Long to Keep Them
From Tax Guide.
Tax Guide · Arab, Alabama
How Long Should You Keep Tax Records? What to Keep and What to Shred
Most tax records should be kept at least three years after filing, and some much longer. See what to keep, what to shred and how to store it.
The short answer
How long do I need to keep tax records?
As a general rule, keep tax records for at least three years after you file the return, because that is the usual window for claiming a refund or for the IRS to review a return.
The three-year rule is a starting point, not the whole answer. Some records need to be held much longer, and a few situations extend the time the IRS can look back. When in doubt, keeping a record longer costs little, while throwing away one you need can cost a great deal.
The clock generally starts when you file, and a return filed before the due date is usually treated as filed on the due date. Records supporting an amended return matter too: our guide on how to amend a tax return explains why the three-year window shapes that choice.
At a glance
What tax records should I keep, and for how long?
Different records have different lifespans, depending on what they prove.
The table below gives general guidance. Longer periods apply in some situations, and Alabama may have its own requirements, so use it as a guide and ask us about special cases.
| Record | General guidance |
|---|---|
| Filed tax returns and supporting papers | At least three years after filing |
| W-2s, 1099s and income statements | At least three years, with the return |
| Receipts and proof of deductions or credits | At least three years, with the return |
| Records for a home, investments or business property | Until the property is sold, plus the years after that sale is reported |
| Employment tax records | Longer than the general rule; see our payroll records guide |
| Returns where income was left off or fraud is claimed | Much longer; the IRS look-back period is extended |
| A return that was never filed | Keep indefinitely |
Property records are needed to prove what you paid, which sets your gain or loss when you sell.
Special cases
Which records should I keep longer than three years?
Keep records about property and investments until well after you sell them, and keep employment and unfiled-year records much longer.
The cost of a home, a rental, a business asset or an investment is called its basis, and it decides how much gain or loss you report at sale. The purchase documents, improvement receipts and closing statements may be needed decades after you buy. Keep them until you sell, then for the years after that return.
Business owners should also read our guide to payroll records and how long to keep them, since employment records follow longer rules.
Some situations lengthen the look-back period, including a large amount of unreported income, a fraudulent return and a return that was never filed. If you have gaps in your filing history, see our guide on unfiled tax returns. Loss deductions from an earlier year that carry forward also mean the original records stay useful.
- Home purchase and closing papers, and improvement receipts.
- Brokerage statements showing purchase price and dates.
- Business asset purchase records and depreciation schedules.
- Records of inherited or gifted property.
- Copies of returns themselves, which are worth keeping for a long time.
Cleaning out the files
What can I shred, and what should I do first?
You can generally shred records once their retention period has passed and you no longer need them for another purpose.
Before you shred, check that the return is not under review, that no notice is outstanding, and that the paper is not needed for property basis, a loan or an insurance claim. One document can serve several purposes.
Shred rather than toss. Old tax papers carry Social Security numbers, account numbers and addresses, which are exactly what identity thieves look for. A cross-cut shredder or a shredding service is worth the effort.
- Confirm the retention period has passed for that year.
- Make sure no IRS or state notice is open for that return.
- Keep anything tied to property you still own.
- Keep a copy of the return itself.
- Destroy the rest securely.
Storing them
Can I keep my tax records digitally?
Yes, clear digital copies are generally acceptable, provided they are complete, legible and easy to retrieve.
Scanning saves space and lets you search by name or year. Store scans in more than one place, such as your computer and a backup drive or secure cloud folder, and protect them with a strong password.
Organize them the way you would paper: one folder per tax year with subfolders for income, deductions and property. Our guide on receipts and expense tracking covers day-to-day habits that make the year-end filing painless.
Special situations
What if I am under review or amending a return?
If a return is under review, being amended or tied to a balance owed, keep every related record until the matter is fully closed.
A notice, an audit or an amended return can extend how long you need the supporting papers. Do not shred anything for a year that is still open, even if the usual period has passed. Keep the correspondence too, along with proof of what you sent and when.
Records also matter beyond taxes. Lenders, insurers and agencies sometimes ask for old returns or income proof. Our guide to what to expect in an IRS audit explains how documents are used in a review.
- Hold records for any year with an open notice or audit.
- Keep the papers behind an amended return until it is fully processed.
- Keep proof of payment for any balance until it is fully paid.
- Save loan and financial aid documents that used your tax information.
How we can help
Not sure what to keep? We can go through it with you.
Melton Tax Services can help through our payroll and bookkeeping service.
We can set up a filing system for your business records, explain what to keep and for how long, and keep copies of what we prepare.
We serve Arab and the surrounding area. Call 256-586-4635 or visit our contact page. Please bring documents to the office; do not send them through the website.
Answers
Questions about keeping tax records
Do I need to keep my old tax returns forever?
You do not have to, but keeping the returns themselves is wise. They show how items were handled in earlier years and are helpful for loans, benefits and future filings.
How long can the IRS go back to audit me?
Generally three years from filing, but longer in some cases, such as significant unreported income or fraud. There is no limit for a return that was never filed.
Should I keep bank statements?
Yes, at least as long as the returns they support. They back up income and expenses, and they are often the fallback when a receipt is missing.
What about records for a house I sold?
Keep the purchase and improvement records until you have reported the sale, and then for the years after that. They establish your cost and may matter for a home sale exclusion.
Is it safe to store tax records in the cloud?
It can be, if the account has a strong password and two-step sign-in. Keep a second backup and avoid sharing the folder with people who do not need it.
Should I keep records for a business I closed?
Yes. Keep the final returns and records for the same periods you would for an open business, and longer for employment and property records.
Can I request an old return copy if I lose mine?
You can ask the IRS for copies of past returns and transcripts. Alabama returns can be requested from the Department of Revenue. We can help you find the right route.
Read next
Related reading
How to Track Business Expenses and Receipts
From Tax Guide.
How to Amend a Tax Return (Form 1040-X)
From Tax Guide.
Payroll and Bookkeeping
A service Melton Tax Services provides.
Melton Tax Services
Questions about your taxes or your business?
Our team in Arab is just a phone call away, and we are glad to talk it through with you.