Small Business Owners: How Long Should You Keep Tax Documents?
This is a question that bugs a lot of small business owners, and I’ve never been clear myself. I’ve heard the numbers 3 years, 7 years, and 10 years thrown around. I decided it was time to find out for myself, straight from the horse’s mouth, so to speak.
You can find the specific IRS regulations regarding how long you should keep paperwork here:
IRS: How long should I keep records?
Be prepared. The first two paragraphs on this web page are pure legalese. Blah, blah, blah. Basically, there is a “period of limitations” for each situation, with the period being different for each situation.
When You Need to Keep Tax Records Indefinitely
There are only two situations when you need to keep your records indefinitely. If you fall into either of those categories, then you and your small business are in hot water anyway, so count on keeping your records forever (or burning them and running to some South American country!). Those two situations are:
1. You file a fraudulent return
2. You didn’t file a return when you should (oops!)
Aside from these situations, you’ll find a complete list of the “period of limitations” for all other situations. The number of years you need to keep your paperwork ranges from 2 to 7 years. Check out the list. If you still have questions, call your accountant to double-check. Remember, the tax code is over 18,000 pages, so be safe rather than sorry!
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Photo credit: Filing Box and Label Printer
