Set record retention around IRS periods: 3 years for most tax records, 4 for employment tax, longer in set cases

IRS guidance says to keep records 3 years in most cases, 3 years from filing or 2 from payment for refund claims, 7 years for worthless-securities or bad-debt claims, 6 years for substantially underreported income, indefinitely if no return or a fraudulent return was filed, and employment tax records at least 4 years.

Source facts

The IRS page How long should I keep records? says to keep records for 3 years unless other situations apply, and for 3 years from filing the original return or 2 years from paying the tax, whichever is later, when filing a claim for credit or refund. It says to keep records 7 years for a claim for a loss from worthless securities or a bad debt deduction, 6 years if unreported income is more than 25% of the gross income shown, and indefinitely if no return or a fraudulent return is filed.

It says to keep employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later, and generally to keep records relating to property until the period of limitations expires for the year the property is disposed of. When records are no longer needed for tax purposes, it says not to discard them until checking whether they must be kept longer for other purposes, for example by an insurance company or creditors.

Applicability

Use this for federal tax records. State tax agencies, industry regulators and contracts may set different periods, and records involved in litigation or investigations must be preserved regardless of schedule.

DSE recommendation

DSE recommends basing retention settings for financial and payroll records on the IRS periods, then extending them where insurers, creditors, contracts or other laws require longer. Map each record type to a period and an owner, configure retention labels in email and document systems to match, make sure backups do not silently outlast or undercut the schedule, and destroy expired records securely.

Verification

Review the retention schedule yearly with finance and counsel, sample records at their destruction date to confirm the right label applied, and document legal holds that suspend deletion.

Official reference

Internal Revenue Service — How long should I keep records?. Reviewed October 19, 2026.