Record Retention
Why Keep Records?
Maintaining accurate records is essential for:
- Preparing tax returns
- Supporting income, deductions, and credits
- Providing proof in case of an IRS audit
- Tracking the basis of property for gain/loss
- Meeting legal, financial, and business obligations
- Preparing tax returns
- Supporting income, deductions, and credits
- Providing proof in case of an IRS audit
- Tracking the basis of property for gain/loss
- Meeting legal, financial, and business obligations
The IRS requires that you be able to substantiate the information on your tax return. This is known as the burden of proof.
How Long Should You Typically Keep Records?
Type of Record
Retention Period
General tax records
3 years
Claiming a credit/refund
3 years from filing or 2 years from payment (whichever is later)
Unreported income (25%+ of gross income)
6 years
Worthless securities or bad debt deduction
7 years
No return filed or fraudulent return
Indefinitely
Employment tax records
At least 4 years after tax is due or paid
Property records
Until the period of limitations expires for the year of disposal
What Records Should You Keep?
For Individuals:
- Tax returns and supporting documents (W-2s, 1099s)
- Receipts for deductions (medical, charitable, etc.)
- Investment and retirement account statements
- Receipts for deductions (medical, charitable, etc.)
- Investment and retirement account statements
- Mortgage and property records
- Health insurance documentation
- Health insurance documentation
For Businesses:
- Gross receipts (sales invoices, bank deposits)
- Assets (purchase/sale records, depreciation schedules)
- Employment tax records (W-4s, timecards, payroll returns)
- Assets (purchase/sale records, depreciation schedules)
- Employment tax records (W-4s, timecards, payroll returns)
- Purchases (bills, receipts)
- Expenses (rent, utilities, payroll)
- Expenses (rent, utilities, payroll)
How Should You Record Transactions:
- Using accounting software, spreadsheets, or manual ledgers.
- Keep original documents (paper or digital) that support entries.
- Organize records by year and category for easy access.
- Keep original documents (paper or digital) that support entries.
- Organize records by year and category for easy access.
Best Practices:
- Digital copies are acceptable if they are accurate and accessible.
- Back up your records in secure, redundant locations.
- Review annually to discard outdated documents.
- Consult your tax advisor for specific retention needs based on your situation.
- Back up your records in secure, redundant locations.
- Review annually to discard outdated documents.
- Consult your tax advisor for specific retention needs based on your situation.
What Records Should You Keep?
If you're unsure about which documents to keep or how long to retain them, don't hesitate to reach out. Our team is happy to guide you through the process and ensure you're meeting all IRS requirements with confidence. Contact us today for personalized support and peace of mind.