Registered Tax Return Preparer RTRP Practice Exam 2025 – The Comprehensive All-in-One Guide for Exam Success

Taxpayers should generally keep tax-related records for three years from the date they filed their tax return or the due date of that return, whichever is later. This period aligns with the IRS statute of limitations for audits, giving the IRS the ability to examine returns for errors or discrepancies within this timeframe. Retaining records for three years allows taxpayers to provide documentation in case they need to substantiate their reported income, expenses, or deductions in the event of an audit.

While it might seem prudent to keep records longer, the three-year guideline balances the need for audit protection with the practicalities of storage and record-keeping. Some specific exceptions may require longer retention periods, such as if a taxpayer underreports their income by more than 25%, which extends the audit window to six years. Certain situations, like claims for loss from worthless securities or bad debts, might also warrant keeping records longer.

Options suggesting shorter retention periods may not provide adequate protection during the audit period, and keeping records forever is impractical and unnecessary for most taxpayers.