Carryforwards
Capital losses, unused credits and other amounts that could not be applied last year and roll into this one. These exist only in the return.
Tax & CPA workflow
What is a prior-year return?
A prior-year return is a tax return from an earlier year, most often the one immediately before the year being prepared. Preparers use it as the starting point for the current return, because it holds figures and elections that carry forward and cannot be reconstructed from this year's documents alone.
What a preparer takes from last year's return
A preparer reads last year's return before asking you anything. Six things come straight out of it.
Depreciation schedules
For rental property or business assets, the schedule showing what has been claimed and what remains. Rebuilding one without the prior return is slow and error-prone.
Basis
What you paid for a business interest, a property or a holding, adjusted for everything since. Basis errors are among the most expensive to unwind.
Elections made
Choices made in an earlier year that continue to apply, such as an accounting method or a treatment of a particular asset.
State filing history
Which states you filed in, and in what capacity. This shapes the questions a preparer asks about the current year.
A shape to compare against
Last year's income, deductions and credits give the preparer a baseline. A figure that moves a long way is a prompt to ask why, rather than an error.
Why a new firm asks for two or three years
It looks like due diligence on your old preparer. It usually is not.
Some carryforwards run over several years, so one return does not show the full picture. A capital loss carried forward can span multiple years, and reading only the most recent one shows the balance without the history behind it.
Depreciation is the clearest case. An asset placed in service four years ago has a schedule that only makes sense read from the start. A single prior return shows one year of a longer sequence.
The third reason is pattern. A firm taking on a client wants to see whether last year was typical or unusual, and that needs more than one point of comparison.
If a firm asks for three years and you only have two, say so. It is common, and transcripts can usually fill the gap.
What carries forward from one year to the next
Most of a return does not carry forward. Income is income for that year, and most deductions apply to the year they occurred.
What does carry is anything that could not be fully used. A capital loss larger than what could be applied against gains. A credit that exceeded the tax owed. A charitable contribution above the limit for that year.
Alongside that sits anything measuring a position rather than an event. Basis in an asset. Accumulated depreciation. Retirement account basis. These describe where you stand, so each year updates the prior figure rather than replacing it.
The practical consequence is that a gap in your records is not just a missing year. It breaks the chain, and everything after it has to be reconstructed or estimated.
How long to keep tax records
How long you keep a return depends less on the year and more on what is in it.
Three things drive the answer. The first is how long the IRS has to question a return, which depends on the circumstances of that return rather than being one fixed period for everyone.
The second is whether the return supports something still in use. A depreciation schedule matters for as long as the asset is held. Basis records matter until the asset is sold, which may be decades. These are not tied to the age of the return at all.
The third is what other people ask for. A mortgage lender asking for two years of returns does not care about IRS periods, and neither does a landlord or a visa application.
The practical version most firms land on: keep the return itself far longer than you keep the supporting receipts, and keep anything relating to property or a business interest until well after you have disposed of it.
How to get a copy if you do not have one
Most people have fewer old returns than they think, and it is a solvable problem.
Your previous preparer holds copies and will usually provide them. Firms are generally required to return your own records, though their working papers stay with them. If you left on poor terms it can be slow, but it is rarely refused.
The IRS provides transcripts, which summarize what was filed rather than reproducing the return itself. For most purposes a transcript is enough, and it is faster and cheaper than requesting an actual copy. Both are available through the IRS directly.
Tax software holds copies if you filed yourself, usually within the account you filed from.
Worth knowing: a transcript and a copy of the return are not the same document. A transcript shows the figures. A copy shows the return as filed, including schedules. If someone asks for one specifically, check which.
Prior-year return vs amended return
A prior-year return is a return from an earlier year, filed at the normal time for that year.
An amended return is a correction to a return already filed, for any year. You amend when something was wrong or something arrived late.
The confusion comes from timing. Both involve an earlier year, and both surface when a preparer is looking backwards. But one is the original record and the other is a change to it.
If a year was amended, the amended version is the one that matters. Tell a new firm, because a transcript may not show the amendment straight away and the figures will not reconcile.
When last year's return does not help
Preparers lean on the prior year, and there are situations where it misleads.
A year with a one-off event. A property sale, an inheritance, a business sold. The prior return shows something that will not repeat, and treating it as a baseline produces the wrong expectation.
A change in status. Marriage, divorce, a move between states, a change in filing status. Much of the prior return no longer describes the same taxpayer.
A first year of self-employment. Nothing in an employment-only prior return prepares for the questions a self-employed return asks.
A year that was itself wrong. If last year contained an error, carrying it forward propagates it. This is one reason new firms read the prior return rather than just extracting numbers from it.
What to send a new firm
A new firm's document request list usually starts here.
The last two or three returns
Complete, including all schedules. A summary page is not enough, because the carryforward detail sits in the schedules.
Depreciation schedules
If you own rental property or business assets. These are often a separate attachment rather than part of the main return.
Any amended returns
Along with the original for that year. Both, not just the amendment.
Notices you received
Anything from the IRS or a state, even if it was resolved. It changes how a firm approaches the year it relates to.
A note on anything unusual
A year filed late, a year with an extension, a period abroad, a change of state. None of it is unusual to a firm, and all of it is faster to say than to discover.
For firms: prior-year data and pro forma organizers
The prior year is the difference between asking a client everything and asking them what changed.
Firms with the previous return on file can pre-fill an organizer, so a returning client marks changes rather than starting from a blank page. Completion rates on a pro forma organizer are noticeably better, and the reason is simple: it is a shorter task.
The same data narrows the document request. If a document was collected last year and the situation has not changed, requesting it again wastes a round trip on both sides.
Where this breaks down is storage. Prior-year data is only useful if it can be found and read, and a firm holding returns as PDFs in a folder per client has the data without the access. The firms getting value from it are the ones where last year's figures surface inside this year's engagement rather than in an archive.
For a first-year client there is no prior year in the system, which is why onboarding is the longest engagement a firm runs and why prior returns are the first thing requested.
Answers at a glance
Common questions
A prior-year return is a tax return from an earlier year, usually the one before the year being prepared. Preparers use it as a starting point because it holds carryforwards, depreciation schedules and elections that continue to apply and cannot be reconstructed from current documents.
To read the carryforwards, depreciation schedules and basis records that only exist in the prior return. Some of these span several years, which is why firms often ask for two or three rather than one. It is not a review of your previous preparer.
A prior-year return is the original return for an earlier year. An amended return is a correction to a return already filed, for any year. If a year was amended, the amended version is the one that matters and a new firm needs to know about it.
Anything that could not be fully used in the year it arose, such as a capital loss larger than the gains available to offset it or a credit that exceeded the tax owed. Alongside that sit position records like basis and accumulated depreciation, which each year updates rather than replaces.
Your previous preparer holds copies and will usually provide them. The IRS provides transcripts, which summarize what was filed and are faster to obtain than an actual copy. If you filed yourself, the software account you filed from will hold it.
No. A transcript summarizes the figures that were filed. A copy reproduces the return as submitted, including schedules. A transcript is enough for most purposes, but if someone asks specifically for a copy, check which they mean.
Tell the firm early. Transcripts usually fill the gap, and a preparer knows the quickest route to obtain one. A missing year is a scheduling question when raised in January and a problem when discovered in April.
Every schedule. Carryforward and depreciation detail sits in the schedules rather than on the summary pages, so a return without them is missing exactly the parts a preparer needs.
A pro forma organizer is pre-filled with your figures from last year, so you mark what changed rather than entering everything again. Firms produce them for returning clients using the prior-year return already on file.
Only when the firm does not already hold them, which usually means the first year with a new firm. After that they have the return they prepared, and each year builds on the last.
Related terms
Last year is the fastest way into this year
A prior-year return holds most of what a preparer needs before a client answers a single question. TaxFlo, one of the AmitaSoft platforms, works from what the firm already holds: it suggests documents already on file rather than requesting them again, and shapes each client's questions around what changed.
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