How Long Do I Keep It?

If you are like most business owners, you probably have boxes of receipts and invoices taking up precious space in your garage and would like to free it up for a set of new golf clubs. But, you’re scared to throw it out, because the IRS could come calling any day. So, exactly how long are you supposed to hold on to that stuff?

The simple answer is six years, but of course, it's not really that simple. The length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out. The period of limitations is the time that the IRS allows you to amend a return or that the IRS can assess additional tax. This period is typically three years.

But, don’t stop there. If you underreport your income or file a fraudulent return, you need to keep your documents for up to six years. So, if you’re audited and they find mistakes or omissions that they deem “fraudulent,” then the IRS can look back at your returns for up to six years.

Here’s a quick list of the time you need to keep various records.

• Corporate records – indefinitely
• Tax returns – indefinitely
• Lease agreements or contracts – for the life of the lease or contract plus 6 years
• Backup tax receipts, invoices and documents – 6 years
• Receipts for asset purchases – for the life of the asset plus 6 years

While holding on to all those records may be inconvenient, it is extremely important that you are able to verify every deduction that you claim on your return. Maybe you can find some room in the attic.

Please contact us today for a free consultation to see how we can help you with your tax and accounting needs!