SRS: How Long to Keep Tax Returns and Records?

How long should you keep tax returns and other records? The answer depends on the type of document and the kinds of transactions you engage in.

Tax returns

As a general rule, you should keep your tax returns for at least three years from the due date of your return. That’s generally how long the IRS has to question items on your return and to bill you for any additional tax. It’s also the timeframe for you to file an amended return to seek a refund. IRS can go back up to six years if your return omits more than 25% of income. If fraud is proven, there is no time limit. However, California intentionally has a year longer than the IRS meaning you should keep your tax returns for at least four years or seven years.

Tax Returns and Records You Should Keep for Longer

Don’t automatically throw out all of your tax returns and records after three years. Look over old documents to see if you might need any parts of them in the future. Here are some common examples of records and returns that you should keep longer than three years.

Real Estate

• Hold on to records that help establish the adjusted basis (tax cost) of real estate
• Save your escrow sheet whenever you buy real property, including your home
• Don’t throw away invoices for major improvements made to the property
• If you have multiple real estate properties, each property should have a folder
• Retain all files until at least three years after you dispose of the property

Taxpayers who keep good records will find it easier to calculate the adjusted basis of their real estate investments compared with people who don’t maintain records.

Securities

The same rules that apply to real estate apply to securities transactions. Be sure to keep your purchase documents for taxable mutual funds, stocks and the like. You’ll need to include the purchase date and cost on your return in the year you sell the assets. Most people keep their securities at a brokerage firm. The annual statement from the firm should provide this information.

IRAs and 401(k)s

If you’ve made nondeductible pay-ins to IRAs or post-tax pay-ins to 401(k)s:
• Save records until three years after the accounts are depleted
• File Form 8606 with your return each year you make a nondeductible IRA contribution. If you don’t, those contributions will be treated the same as deductible pay-ins when withdrawn – i.e., as income
• Retain copies of Form 8606 and your 1040s for each year that such pay-ins are made

Inheritance

If you inherit property or receive property as a gift, heed this advice:
• For inheritances, you’ll need to know the date-of-death value; this includes inheritances from your spouse.
• For gifts, you’ll need to know the donor’s cost.
• So, keep documentation of these figures until three years after you sell the asset.

SRS Reminder: Property tax bills

2024-25 property tax bills were mailed out starting October 1, 2024. The first installment of property tax payments for fiscal year 2024-25 is due November 1 and becomes delinquent after December 10

Monday, December 10 is the last date for paying your first installment of your Santa Clara County real estate tax without paying a 10 percent penalty and late fees.

You may pay online at https://payments.sccgov.org/propertytax. There is no fee for paying electronically. Just have your checkbook handy so you can enter the bank routing number and your account number.

A 2.22 percent convenience fee with a $1.49 minimum will be charged by the payment processing vendor when using a debit or credit card.

If you pay with a paper check, your payment envelope needs to be postmarked by December 10. Paying online eliminates the worry as to whether or not the post office processes your mail by the due date, or the County loses your envelope.

Note: The Senior Resource Services (SRS) office hours for drop-in assistance are Monday, Wednesday, and Friday from 10 a.m. to noon. The SRS office is in the Cribari Center across from the Post Office. You may also leave a message at 408-239-5253 or e-mail SRS at villagessrs@sbcglobal.net. The purpose of SRS is to provide education and general business and financial information. All assistance is free and confidential. You should ask your professional advisor about your individual situation.