Sponsor spotlight a guide to tax record retention

Taxpayers should retain Form 1040 indefinitely and supporting documents, such as W-2s and receipts, for a minimum of seven years to prepare for potential IRS audits. Records related to property and investments must be kept longer to substantiate cost basis and gains. Federal guidelines suggest retaining records for three years, but state requirements may extend this period. Specific rules apply to unreported income and fraudulent returns, with no audit time limit for the latter. Organizing documents by year and matching them to Form 1040 can facilitate easier access during an audit.

Scanning files for digital backups and creating folders for the upcoming tax year can enhance organization. By beginning this process now, taxpayers can ensure they are well-prepared for the tax environment in 2025. A proactive approach to record retention can prevent complications during audits and support accurate tax filing.