The length of time you’ll need to keep records depends on the action or expense each document records. For legal purposes you may need to hold on to some records permanently, but typically for business taxes, you only need to keep records supporting income or deductions on a return until the period of limitations for that return is up. The period of limitations is the time-span during which you can amend a tax return to get credit or a refund (the IRS can also asses additional taxes in this time). Even if you no longer need records for tax purposes, you may still decide to keep them, as other organizations may require them.

Here are some of the standard limitation periods on tax-related documents, according to the IRS:

  • If you owe additional taxes, keep records for 3 years
  • If you do not report income that should have been reported, and it exceeds 25% of the gross income on your return, keep records for 6 years
  • If you file a fraudulent return, keep records indefinitely
  • If you do not file a return, keep records indefinitely
  • If you file a claim for credit or refund after filing your return, keep records for 3 years from the filing of the original return
  • If you file a claim for a loss due to bad debt deduction or worthless securities, keep records for 7 years
  • Keep all employment records for at least 4 years after the tax is due or paid

Some business records should be kept permanently:

  • Audit reports and charts of accounts
  • Canceled checks for important payments
  • Records of capital stocks and bonds
  • Cash books
  • Contracts and leases still in effect
  • Legal correspondence
  • Deeds, mortgages, bills of sale
  • End of year financial statements
  • Insurance records
  • Minutes, bylaws and charters
  • Property appraisals and records
  • State and federal income tax returns
  • Trademark registrations

Other records are commonly kept only up to seven years:

  • Accident reports and claims
  • Ledgers and schedules for accounts payable and receivable
  • Bank statements
  • Most canceled checks
  • Expired contracts and leases
  • Product, material and supply inventory
  • Customer and vendor invoices
  • Ledger and schedules for notes receivable
  • Option records
  • Payroll account records
  • Purchase orders
  • Sales records
  • Canceled stock and bond certificates
  • Vouchers

For more information about business taxes, go to www.irs.gov.