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How long should you keep tax returns
How long do I need to keep my tax records for?
Let's face it – keeping track of tax records isn't exactly the most glamorous part of being self-employed. But it's a necessary evil if you want to keep the IRS happy. So for how long should you keep these records?
The answer is not super straightforward. As a rule of thumb, you’re supposed to keep your tax records for three years from your last filing date in case you get hit with an IRS audit notice. This is because the IRS has three years to look over your tax return and decide whether you need to be audited.
But there are other rules that are dependent on what kind of assets you own, the tax refunds you might be eligible for and if you’ve not filed a return in a couple of years (hopefully not because you love tax fraud).
Key takeaways:
- Generally, the IRS expects you to keep your tax records of the past three years
- You will need to keep your tax records for longer if you own other assets
- You will need to show proof of all your returns and other relevant tax information if you get audited
Table of contents
Saving tax returns
As a 1099 taxpayer, it’s always on you to keep a record of all your tax information. But figuring out how long you should keep your tax records depends on a few things. Typically, it’s necessary to maintain tax records, business records and receipts for at least three years.
This rule is implemented to let the IRS conduct an audit within a three-year window and determine if you owe them any extra taxes. You also need them if you’re trying to file for a refund past the original year you should have claimed it.
Sometimes, you may be required to retain your tax records for longer. For example, if you underestimate your income by over 25%, the statute of limitations is extended, allowing the IRS to conduct an audit on your return for up to six years. To address any inquiries during this time, you would need to retain tax documents spanning six years.
If you’re trying to depreciate any kind of property that you own, you are generally expected to hold on to those tax records until you have fully written off that asset. This also applies to any kind of retirement accounts (like IRAs) that you’re currently using. In this case, you would wait until you have fully cleaned out the account.
The amount of time you should keep your financial records when paying income taxes can also depend on state law and can differ by location. It's worth noting that some states may have a longer look-back period than the IRS, meaning that you need to keep records for an extended period. For example, Texas has a limit of four-year statue of limitation while it’s only three in New York. You can always ask a CPA in your state to be on the safe side.
Quick tip
Visit the tax refund page if you’re still waiting on your refund from the IRS.
What tax documents should I save?
So, now that you know how long you’ll need to keep your tax returns, let's move on to what kinds of information you’ll actually need to save. If you operate as an LLC or a Partnership, you’ll need to save your employees’ tax information even if they've left the business for at least four years.
If you’re operating solo, you’ll need to save all the receipts, invoices and proof of any transfers you may have received or sent. Your 1099 forms and bank statements are equally as important to keep.
But you don’t have to save all your receipts if an app does it for you. With FlyFin, you can just link your expenses and let an A.I. find all the tax deductions you can claim every tax year. If you want expert advice on 1099 taxes, a team of CPAs is available 24/7 on the app. They can even help you by preparing and filing your federal and state tax returns.
How do I store these returns?
You’re probably thinking, “Wow, this is a lot of information the IRS wants me to save.” And you’re right; it is. But you don’t have to stuff it all into an overflowing drawer in the corner of your house.
You have the option to can scan and save these documents digitally if you want to save some space. The IRS will still accept them as long as they are readable. And if you save your records electronically, you don't have to worry about how long you’ll need to save them.
And even after the IRS limitation has run out, keeping at least a copy of your past returns is a good idea, even if it’s paperless. If your original tax return documents have gone missing or been destroyed, don't worry - the IRS has a solution.
You can ask them for a copies of your tax returns and duplicate transcripts if you need them. You have a few options to request this, like reaching out directly to the agency through their website, sending an email, giving them a call or even mailing in a written request.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors.
But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. technology.
Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes.
In addition, you can download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and money.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
On average users save $3,700
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