How Long Should You Keep Tax Records?

My advice is to keep tax returns forever but only keep the underlying supporting records such as 1099's, bank statements, and other documents for the current year and the three prior years because of the three year statute of limitations. In case of suspected fraud the IRS can go back as far as they want however. Keep closing statements for real estate transactions until the property is sold and then follow the above tax return supporting documents rule. Only the most recent monthly, quarterly and annual brokerage statements need to be kept in your files. This policy should help you keep your storage requirements to a minimum but yet support your tax return in case of audit or tax notice.