Good records aren’t just for tax season, they’re what turn a claimed deduction into a defensible one and make running your business far less stressful.
What to keep
- Income records, invoices, sales receipts, deposit records, 1099s.
- Expense records, receipts, bills, canceled checks, card statements.
- Asset records, purchase and sale documents for equipment and property (needed for depreciation and gain/loss).
- Employment records, payroll, W-4s, and tax deposits.
How long to keep it
A common rule of thumb:
- 3 years, the general IRS audit window for most returns.
- 6 years, if income was substantially understated.
- 7 years, for claims involving bad debts or worthless securities.
- At least 4 years, employment-tax records after the tax becomes due or is paid, whichever is later.
- Indefinitely, copies of filed returns are useful permanently; no-return and fraudulent-return situations also have no ordinary limitation period.
- Property records, keep through the limitation period for the return covering the disposition, including predecessor-property records from certain nontaxable exchanges.
These are federal income-tax guidelines; state law, payroll rules, insurance, creditors, grants, and litigation holds can require longer retention. Review the IRS’s current record-retention guidance before destroying anything.
Go digital
Scan or photograph receipts and store them in an organized, backed-up system. Digital records are accepted by the IRS, easier to search, and immune to faded ink. Separate business and personal accounts so your records stay clean from the start.
Want your books kept clean and current without lifting a finger? See our bookkeeping service or book a consultation.
Build a record trail, not just a folder of receipts
For an equipment purchase, retain the invoice, payment evidence, purchase date, and a note describing its business use. File related financing documents with the asset record rather than burying them in a monthly bank folder. The objective is to explain what happened and connect it to the accounting entry. A scan should be readable, complete, retrievable, and backed up; uploading an image alone does not establish that its tax treatment is correct.
General educational information, not an individual tax opinion. The applicable year, jurisdiction, and facts must be reviewed before acting.