Taxes 101: How Long to Keep Business Tax Records?

Whether your business uses hard copies or paperless methods for record keeping, it can be challenging finding a place for your business records. 

But the fact of the matter is that different business records—tax or otherwise—have to be kept for different amounts of time, according to the periods of limitations. So, what exactly is a period of limitations?

A period of limitations is a certain amount of time where you can make an amendment to your tax return in order to claim a credit or refund. Within this time, the IRS is also free to assess additional tax. 

TPI Group can help you navigate the murky waters of tax law to ensure your business remains in the clear with the IRS.


How Long Should You Keep Your Tax Records in Case of an Audit?

Business tax records consist of annual tax returns, 1099 and W-2 forms, and letters from the IRS. We all know taxes are confusing, so keep in mind that tax returns filed before the due date are considered to be filed on the due date.   

When it comes to your business records, you need to keep:

  • Employment tax records for four years starting from the date of payment or when the tax was due.
  • Past income tax returns for at least three years, however there are exceptions (see below). This is to be calculated from the date your original return was filed or alternatively, two years from the date your taxes were paid if a claim for credit or refund was filed after filing the tax return. 


If you did not report income that, by law, should have been reported, and the income was more than 25% of the gross income shown on your return, you must keep past income tax returns for six years instead of three.

If you filed a claim for a loss from worthless securities or bad debt deduction, you need to keep your supporting business documents and records for seven years. If you did not file a tax return or if you filed a fraudulent return, you must keep past income tax records indefinitely.


Can the IRS Go Back More Than 10 Years?

According to the American Bar Association, the IRS has 10 years from the date the taxes were assessed to collect unpaid debt. The 10 years end on the Collection Statute Expiration Date (CSED). 

However, the CSED can be renewed, temporarily stopped, or delayed, depending on the situation. Additionally, the IRS calculates the tax assessment date differently compared to taxpayers, which can lead to mistakes and surprises on the taxpayer’s end. 

For these reasons, speaking to a tax consultant will make dealing with the IRS easier and less confusing.

What Other Types of Business Records Should Be Kept?

Business records are any document, invoice, or receipt related to the operations of a business. This includes:

  • Accounting: bank statements, receivable ledgers, inventory, etc. 
  • Human Resources: personnel and payroll records, employee reviews, etc.
  • Other Miscellaneous Corporate records: insurance policies, warranties on equipment, etc.

Insurance companies, lenders, and other establishments have their own period of limitations for the business records listed above. Whether you’re a high-income individual who freelances on the side or you run your own business day and night, TPI Group offers tax preparation services and more to protect your future.


TPI Can Help You to Keep Records Organized and Safe

We can help you to get your financial statements, records, and more in order. But there is another benefit to partnering with TPI Group.

Lost, Stolen, or Destroyed Records

Records and supporting documentation can become lost, stolen, or damaged in some way online and offline. Unfortunately, the IRS will deny your claims if you cannot provide the supporting documentation. However, if you can give evidence of the occurrence, such as police reports or photographs of the damage, the IRS will be lenient. 

Because of fire, theft, and malware, it’s a good idea to protect your business by using a third party to keep your records safe, a third party like TPI Group. 

Our tax specialists provide up-to-date information and expertise for your financial benefit. We save you money in the long run by ensuring your taxes are government compliant. You don’t need to deal with the hassle of filing your taxes yourself, which can put a large burden on your shoulders.

Contact us today to find out more about how you can maintain your financial records.