Record retention Current

Setting a record retention schedule for IRS tax records

The right retention period depends on which specific situation applies, not one flat number.

The IRS sets out several different retention periods for tax records depending on the situation, from three years up to indefinitely. This guide sets out what those periods are. It is general information, not tax advice, and it is separate from any state bar rule on client trust account records.

Action plan

1 Apply the three-year baseline unless a longer period applies Three years is the IRS's own default, unless a specific situation extends it.

The IRS states the general rule as keeping records for three years, unless one of several specific situations applies. That three-year period also applies, measured differently, to a claim for credit or refund filed after the original return: three years from the date the original return was filed, or two years from the date the tax was paid, whichever is later.

  • Treat three years as the default retention period for most tax records
  • For a credit or refund claim, use three years from filing or two years from payment, whichever is later
  • Check the specific situations below before assuming the three-year default applies

Done when: Tax records are retained for at least three years by default, with the correct starting point applied for any refund claim

IRS: how long should I keep records
2 Extend to six or seven years for two specific situations Unreported income and worthless-securities claims each trigger a longer period.

The IRS extends the retention period to six years where a taxpayer does not report income that should have been reported, and that unreported amount is more than 25% of the gross income shown on the return. Separately, the IRS extends retention to seven years where a taxpayer files a claim for a loss from worthless securities or a bad debt deduction.

  • Keep records six years where unreported income exceeds 25% of the gross income shown on the return
  • Keep records seven years for a worthless-securities loss or bad-debt-deduction claim
  • Track which specific situation applies per client, rather than applying one figure to every file

Done when: The correct extended retention period has been applied for any client whose situation involves unreported income or a worthless-securities claim

IRS: how long should I keep records
3 Know the indefinite-retention cases, and the separate employment-tax rule Two situations call for keeping records indefinitely, and employment tax records run on their own clock.

The IRS states that records should be kept indefinitely if no return was filed, and indefinitely if a fraudulent return was filed. Separately, employment tax records should be kept for at least four years after the date the tax becomes due or is paid, whichever is later, regardless of the general retention rules above.

  • Keep records indefinitely where no return was filed
  • Keep records indefinitely where a fraudulent return was filed
  • Keep employment tax records at least four years from when the tax became due or was paid, whichever is later

Done when: Indefinite retention has been applied where no return or a fraudulent return was filed, and employment tax records meet the separate four-year rule

IRS: how long should I keep records
4 Don't confuse this with your state bar's trust-account retention rule These are IRS tax-record periods; a lawyer's client trust account records follow a different rule entirely.

These retention periods apply to IRS tax records. If your firm also holds client trust account records subject to a state bar's adopted version of the ABA Model Rules, that is a separate obligation with its own retention period, not something this guide's tax-record periods substitute for.

  • Apply the IRS periods above to tax records specifically
  • Apply your state bar's own adopted retention rule to client trust account records separately
  • Don't assume one retention schedule covers both categories

Done when: Tax records and any client trust account records are retained under their own separate, correctly applied retention rule

See the ABA Model Rule client trust account recordkeeping baseline