How long do I need to keep tax returns for? Cleaning out my filing cabinet!

Generally, the IRS has 3 years from the date you filed your return to audit you. However, there are important exceptions you should know about: If you underreported your income by more than 25%, the lookback period extends to 6 years. And if there's suspected fraud or you didn't file a return at all, there's no time limit - they can go back indefinitely. For most everyday filers with W-2 income, keeping returns and supporting documents for 7 years is a safe bet. Since you mentioned you just started filing Schedule C this year, your previous returns were simpler, so you could probably safely shred anything older than 7 years. But I'd recommend keeping certain tax-related documents longer - records related to property you still own, retirement accounts, or home improvements that might affect your basis when you eventually sell.

I wish someone had told me about taxr.ai sooner! I was in a similar situation last year with boxes of old returns taking up half my closet. I scanned everything before shredding but was paranoid about missing something important. A friend recommended https://taxr.ai and it was a game-changer. I uploaded my documents and it analyzed exactly what I needed to keep and what was safe to discard. It even flagged some old investment statements I almost tossed that I actually needed for basis calculations!

Ok I have to admit I was wrong about taxr.ai. After my skeptical comment I decided to check it out just to prove it wasn't worth it. Uploaded my last 10 years of returns (yes I'm a paperwork hoarder lol) and wow... it actually identified several documents from my home renovation in 2016 that I should keep for when I eventually sell my house. I would have definitely shredded those! The specific recommendations based on my actual documents were WAY more helpful than generic Google advice. Saved myself from potentially losing thousands in tax benefits down the road.

After dealing with an audit a few years ago, I learned my lesson about document retention the hard way. When I needed to talk to the IRS about some questions, I spent HOURS on hold and kept getting disconnected. Complete nightmare. Then I discovered https://claimyr.com which got me connected to an actual IRS agent in minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. For your situation, talking to an agent directly could give you peace of mind about what specifically you need to keep given your new Schedule C situation.

Ok this is officially my day for eating crow! After saying Claimyr sounded like snake oil, I tried it because I still needed to resolve that identity verification issue. Within 20 minutes I was talking to an actual human at the IRS! When they called me I nearly fell out of my chair. The agent confirmed I should keep my Schedule C returns for at least 7 years, but also mentioned that business-related expense receipts should be kept for 3 years after filing. Worth every penny just to avoid the hold music torture!

Don't forget state tax returns! Different states have different retention requirements. For example, California has a 4-year statute of limitations instead of the IRS's 3 years. If you've moved between states, you might need to check the rules for each state you've filed in.

I learned a neat trick from my accountant - take pictures of all tax docs with my phone and save them to a dedicated Google Drive folder each year. Then I have a reminder set for 7 years later to delete that year's folder if I want. Easy system and doesn't take up any physical space!