How many years should I actually hold onto old tax returns? 7 years or just 3?

The general IRS rule is to keep tax returns and supporting documents for 3 years from the date you filed the return. This is because the IRS typically has 3 years to assess additional tax if needed. However, there are some important exceptions: - Keep records for 6 years if you underreported your income by more than 25% - Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction - Keep records indefinitely if you don't file a return or file a fraudulent return - Keep property records (home purchase, improvements, etc.) until you sell the property plus 3 years As for disposal, absolutely shred them! Tax returns contain your SSN, income details, and other sensitive information. Never just recycle tax documents without shredding them first. Identity theft is a serious concern.

After wasting hours searching for old tax documents during an unexpected audit, I found taxr.ai (https://taxr.ai) incredibly helpful. It organizes and analyzes all your tax documents - I uploaded years of returns and it extracted all the important info automatically. It was super convenient for figuring out what I needed to keep versus what I could safely discard. The system also flags items that might trigger audits, which helped me understand why the IRS was questioning certain deductions. It gives recommendations for document retention tailored to your specific situation rather than just the general guidelines.

I was skeptical about taxr.ai at first but decided to give it a try with my messy tax situation. Uploaded 6 years of returns and supporting documents - it organized everything by year and category, then gave me a personalized retention schedule based on my specific deductions and income sources. Turns out I needed to keep some documents longer than others because of some investment losses I'd claimed. The peace of mind knowing exactly what I need to keep (and for how long) was worth it. I cleared out almost 70% of my tax paperwork that was just taking up space. Plus now I have everything digitally organized if I ever need it again.

If you're dealing with the IRS about past returns or trying to get clarification on document retention, don't waste days on hold. I used Claimyr (https://claimyr.com) and they got me through to an actual IRS agent in about 15 minutes when I'd been trying for days on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c I needed to discuss some old returns from 5 years ago that the IRS was questioning, and getting clear answers directly from them saved me a ton of stress. The agent explained exactly which supporting documents I needed to provide and what I could safely discard.

I take back what I said about Claimyr. After spending another 3 hours on hold with the IRS yesterday and getting disconnected AGAIN, I tried the service out of desperation. Within 20 minutes, my phone rang and I was talking to an actual IRS representative who answered all my questions about document retention for my small business returns. Turns out I needed to keep my business records for 7 years, not 3, because of some specific deductions I've been taking. That would've been a disaster if I'd shredded everything based on the standard advice. Sometimes getting official answers directly from the source is worth it.

Don't forget state tax returns too! The retention requirements can be different from federal. Some states have longer lookback periods than the IRS. In California, for example, the statute of limitations is 4 years instead of 3. Also, if you're self-employed or have rental property, you probably want to keep those records longer than the minimum requirement. I learned this the hard way when I needed proof of depreciation from 6 years ago that I had already shredded.

Is anyone else just keeping everything forever now that it's all digital? I scan everything and keep it on an encrypted external hard drive, and it barely takes up any space. Seems easier than trying to remember which tax year I can delete when.

Great question! I was in the same boat - had boxes of tax returns going back to the early 2000s. Here's what I learned after doing some research: The standard rule is 3 years for most situations, but there are definitely exceptions that might apply to you. If you've claimed any business losses, investment losses, or had significant deductions, you might want to keep those specific years longer. One thing I'd recommend is going through your old returns year by year and checking what deductions you claimed. If it's just standard deduction or basic itemized deductions (mortgage interest, charitable donations), then 3 years is probably fine. But if you see anything more complex, maybe keep those a bit longer. For shredding - absolutely yes! I learned this lesson when my neighbor had their identity stolen from tax documents they just threw in regular trash. Get a crosscut shredder if you don't have one already. It's worth the investment for peace of mind. Also, before you shred everything, consider scanning the returns themselves (not necessarily all the supporting documents) and keeping digital copies. They take up virtually no space and you'll have them if you ever need to reference something years later.

This is such a timely question - I just went through the exact same dilemma last month! I was drowning in paper tax returns going back to 2009 and finally decided to tackle the mess. After researching the IRS guidelines and talking to my CPA, here's what I learned: The 3-year rule is correct for most basic tax situations. However, your parents weren't entirely wrong either - keeping them for 7 years is the "safe" approach that covers you for most unusual circumstances. The key is knowing which category you fall into. If you've always taken the standard deduction or basic itemized deductions (mortgage interest, state taxes, charity), then 3 years is fine. But if you've ever had business income, rental properties, significant investment gains/losses, or claimed any unusual deductions, you might want to err on the side of caution and keep those specific years longer. What I did was go through each year and create two piles: "basic returns" (3 years) and "complex returns" (7 years). This let me clear out about 60% of my paperwork while still being conservative with the years that had more complicated situations. And yes, definitely shred everything! I bought a crosscut shredder specifically for this project. Tax documents have way too much personal information to just toss in recycling. It took a weekend, but the peace of mind and freed-up filing cabinet space was totally worth it.

This thread has been so helpful! I'm in a similar situation with years of accumulated tax documents. One thing I wanted to add that I learned from my experience - if you have any amended returns (1040X forms), definitely keep those and their supporting documentation for at least 3 years from when you filed the amendment, not the original return. I had to file an amended return in 2022 for my 2019 taxes after discovering I'd missed reporting some freelance income. My tax preparer told me the 3-year clock resets from the amendment date for that specific issue. So even though my original 2019 return would normally be safe to discard after 2023, I need to keep everything related to that amendment until 2026. Also, for those going digital - I create a simple spreadsheet each year listing what documents I'm keeping and why (basic return vs. business income vs. investment activity). It takes 5 minutes but makes future purging decisions so much easier. I don't have to re-examine every document years later to remember what was in it. And definitely invest in a good crosscut shredder! I went through three cheap ones before buying a heavier-duty model. When you're shredding years of documents at once, the cheap ones overheat and jam constantly.

This is such a helpful discussion! I'm definitely in the "keep everything forever just in case" camp, but reading through everyone's experiences is making me realize I can probably be more strategic about it. One thing I wanted to add that my accountant mentioned - if you're self-employed or have a side business, keep those business-related tax documents for at least 7 years regardless. The IRS can look back further for business deductions, and you might need to prove expenses for depreciation calculations years later. I learned this when I had to reconstruct equipment purchases from 5 years ago for a depreciation schedule. Also, for anyone dealing with the paper-to-digital transition - I found it helpful to start with just the current year and work backwards gradually. Trying to scan and organize 10+ years of documents all at once was overwhelming and I kept putting it off. But doing one year at a time during tax season made it much more manageable. And definitely second the recommendation about keeping property records indefinitely until you sell! I almost threw out home improvement receipts from 2015 but thankfully my realtor reminded me I'd need them to calculate capital gains when I eventually sell. Those receipts could save me thousands in taxes down the road.

This whole thread has been incredibly eye-opening! I've been keeping everything for 7 years too, just like Omar, because that's what I was always told. But after reading everyone's experiences, I think the key takeaway is that it really depends on your specific tax situation. What I'm planning to do now is take the hybrid approach that several people mentioned - keep basic returns (standard deduction, simple itemized deductions) for 3 years, but hold onto anything with business income, significant investment activity, or unusual deductions for the full 7 years. I'm also definitely investing in a good crosscut shredder before I start this project. The security concerns people raised about identity theft are real, and it sounds like the cheap shredders just aren't worth the frustration when you're dealing with volume. One question for those who've gone digital - do you still keep paper copies of the actual tax returns themselves, or do you scan everything and go completely paperless? I'm torn between wanting to free up the physical space and being nervous about relying entirely on digital copies for something so important.

This has been such a valuable discussion! As someone who works with taxpayers daily, I want to emphasize a few key points that have come up: The 3-year rule is indeed the standard, but the exceptions mentioned here are crucial. I see too many people get caught off guard when they need documentation for amended returns, business expenses, or investment basis calculations years later. One thing I'd add - if you're married and file jointly, make sure both spouses are on the same page about document retention. I've seen situations where one spouse cleaned out files without realizing the other had claimed business expenses or investment losses that required longer retention periods. For those going digital, consider the "3-2-1 backup rule": 3 copies of important data, on 2 different types of media, with 1 stored offsite. Tax documents are too important to lose to a hard drive crash or house fire. And please, please shred everything properly! I've helped taxpayers deal with identity theft from improperly disposed tax documents. It's a nightmare that's completely preventable with a good crosscut shredder. The hybrid approach many of you mentioned is exactly what I recommend to clients - keep it simple for basic returns (3 years) but err on the side of caution for anything complex (7 years). Better to store a few extra boxes than to scramble for missing documentation during an audit.