Maintaining proper tax records is essential for both business owners and individuals to remain compliant with IRS regulations and be prepared in the event of an audit. Many business owners ask, “How long should you keep business records?”
While the IRS generally requires keeping records for at least three years, certain tax situations require holding onto documents for up to six years—or even indefinitely in some cases.
Understanding how long to keep business and personal tax records, receipts, and financial documents can help prevent penalties, support deductions, and ensure financial security.
As a trusted CPA firm in Plano, TX, Beckley & Associates PLLC helps businesses and individuals navigate tax compliance with confidence.
How Long Does a Business Need to Keep Records?
The IRS generally requires businesses to keep tax records for at least three years, but specific situations may require extended retention. For a more detailed breakdown, or the latest information, visit the IRS’s Recordkeeping Guidelines.
For expert advice tailored to your business needs, consult with your Plano accountant at Beckley & Associates PLLC.
| Type of Business Record | Retention Period |
|---|---|
| Deposit Slips, Purchase Orders, Customer Correspondence | 1 Year |
| Employee Personnel Records and Applications | 3 Years |
| Tax Returns & Supporting Documents | At least 3 years |
| Payroll Tax Records | 6 years (after filing) |
| Employment Tax Filings | 6 years |
| Business Receipts & Invoices | 3 to 6 years |
| Financial Statements | Permanent |
| Asset & Depreciation Records | Until 3 years after asset disposal |
- While federal guidelines do not require you to keep tax records “forever,” in many cases there will be other reasons you’ll want to retain these documents indefinitely.
- If a business underreports income by 25% or more, the IRS can audit up to six years.
- If fraud is suspected, there is no statute of limitations on IRS audits.
How Long Should Individuals Keep Tax Records?
For personal tax records, the standard retention period is three years, but some financial and tax circumstances require longer recordkeeping.
| Type of Personal Document | Retention Period |
| Tax Returns & W-2s | At least 4 years |
| Supporting Documents (1099s, receipts, charitable donations) | 3 to 6 years |
| Homeownership Records (deeds, closing statements) | As long as you own the property + 3 years |
| Retirement Account Contributions | Permanently |
| Investment & Stock Trade Confirmations | At least 3 years after selling |
| Medical Bills (if deducted on taxes) | 3 to 7 years |
What Happens If You Lose Tax Records?
If you misplace tax documents, you can:
- Request copies from the IRS using Form 4506-T or via your IRS Online Account
- Download bank statements for verification
- Use digital accounting software (e.g., QuickBooks) to retrieve transactions
How to Store Tax Records Safely
Protecting tax documents ensures compliance and reduces the risk of identity theft.
- Go Paperless: Store records digitally using secure cloud storage.
- Encrypt Files: Protect sensitive data with passwords and encryption.
- Use Cloud Backups: Services like Google Drive, Dropbox, or OneDrive provide secure access.
For more information, consult the IRS’s Recordkeeping Guidelines.
FAQs on Tax Record Retention
Q: How long should you keep business tax records?
A: The IRS generally recommends keeping tax records for at least three years, but certain circumstances require six years or permanent retention.
Q: Can the IRS audit me after three years?
A: Yes, but if underreported income exceeds 25% or fraud is suspected, the IRS can audit up to six years—or indefinitely. More details are available in Topic No. 305 – Recordkeeping.
Q: Are digital tax records valid for IRS compliance?
A: Yes, as long as they are legible and accurate.
Q: Should I keep business and personal tax records separate?
A: Yes, keeping them separate prevents compliance issues and simplifies audits.
Final Thoughts: Keep Your Records, Stay IRS-Ready
Knowing how long to keep business records is crucial for tax compliance, financial security, and audit protection. By following IRS guidelines and best practices, businesses and individuals can secure their financial future.
At Beckley & Associates PLLC, a trusted advisory, tax and accounting CPA firm in Plano, TX, we help businesses and individuals manage tax compliance, optimize record retention, and plan for financial success.
Contact us today to discover how our local expertise can support your financial success and your tax records in order.
The information presented is provided for general educational purposes only and may not reflect changes in federal or state laws. Before taking any action based on information in this website, we strongly encourage you to consult with a professional advisor about your specific situation.
IRS Circular 230 Disclosure:
Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained on this website is not intended or written to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Please contact us if you wish to have formal written advice on any matter presented in our videos or on our website.