"How long do I have to keep this?" is one of the questions I hear most, usually from someone standing next to a box of old receipts.
The IRS's answer starts with: it depends on what the record is for. You keep records as long as you might need them to support something on a tax return. Here's how the IRS breaks it down:
3 years is the general rule for income tax records, counted from the date you filed the return (or the due date, if you filed early).
3 years from filing your original return or 2 years from paying the tax, whichever is later, if you file a claim for a credit or refund after filing.
At least 4 years for employment tax records, after the tax is due or paid, whichever is later. If you have employees, this covers your payroll records.
6 years if you didn't report income you should have, and it's more than 25% of the gross income shown on the return.
7 years if you claim a loss from worthless securities or a bad debt deduction.
Indefinitely if you didn't file a return or filed a fraudulent one.
Property is its own category. Keep records for equipment, vehicles and buildings until the period of limitations runs out for the year you sell or dispose of them. That truck you bought in 2019 and still drive? Its purchase records still matter.
The IRS also points out that other people may want records longer than it does, like your insurance company or a lender.
What I suggest in practice:
Go digital. Scan or photograph receipts and save them by year. Electronic records count, as long as they're complete, legible and easy to pull up, and you keep them as long as you'd keep the paper.
Make one folder per tax year, with the return, the statements and the receipts that support it.
Keep asset records separately, until well after the asset is gone.
Ask before shredding. Your tax preparer may want you to hold some records longer.
If your records are more box than system, I can help set up something simple. Send me a message through the Contact page.
— Rachel, Two Miles LLC