Sponsor spotlight A guide to tax record retention

To prepare for potential audits, taxpayers must keep their Form 1040 indefinitely and retain supporting documents like W-2s and receipts for at least seven years. Records related to property and investments should be preserved for seven years after their sale to verify cost basis and gains. State revenue departments may impose longer retention requirements than the federal standard. Taxpayers are advised to organize records by year and align them with Form 1040 to simplify the audit process. Creating digital backups through scanning can add an extra layer of security.

Additionally, individuals should shred old documents rather than discarding them carelessly. Being vigilant about what to keep versus shred is crucial; retain documents unless they can be easily replaced. This proactive approach will help taxpayers navigate the tax environment effectively in 2025.