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
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 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, etc.)
- Receipts for deductions (medical, charitable, etc.)
- Mortgage and property records
- Investment and retirement account statements
- Health insurance documentation
For Businesses:
- Gross receipts (sales invoices, bank deposits)
- Purchases (bills, receipts)
- Expenses (rent, utilities, payroll)
- Assets (purchases/sales records, depreciation schedules)
- Employment tax records (W-4s, timecards, payroll returns)
How Should You Record Transactions?
- Use accounting software, spreadsheets, or manual ledgers.
- Keep original documents (paper or digital) that support transactions.
- Organize records by year and category for easy access
Best Practices
- Make digital copies. 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- Review annually to discard outdated documents.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 with your tax advisor for specific retention needs based on your situation.
Have Questions? We're Here to Help!
If you are 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 are meeting all IRS requirements with confidence. Contact us today for personalized support and peace of mind.