How Long to Keep Business Tax Records and Receipts

How long should I keep business tax records, receipts and bank statements?

For tax purposes, keep the receipts, bank statements, invoices and other records that support an item on a return for 3 years after you file it (IRS). That is the usual time the IRS has to charge more tax and you have to claim a refund. A return filed early counts as filed on its due date. What a receipt must show is in IRS receipt requirements.

Three years is only the default. A case is not simple if a year was never filed, income was left off a return, the business has employees, equipment or a foreign account, or the business is closing or being sold. Each changes the period; the next section lists how.

Gather before you shred anything: every filed return with proof of the filing date, the asset list with purchase invoices, payroll files, loan, lease and insurance papers, and statements for any account outside the US. If you cannot tell which years are still open, most often when closing, selling, cancelling accounting software or clearing out boxes, sort the records by year first.

When do I have to keep business records longer than three years?

These are federal periods, mostly for income tax returns; state taxes and other taxes can differ (IRS).

The 25% test uses gross income before cost of goods sold for a business. It does not count amounts adequately disclosed on the return or in an attached statement, except that disclosure does not help when the omission comes from overstated basis (26 U.S.C. 6501(e)). When it applies, the longer period reaches the whole return, so keep all of that year's records, not only the missing item.

The FBAR record rule is shorter than the six years in which a civil FBAR penalty can be assessed (31 U.S.C. 5321(b)(1)).

When does the three-year clock start?

The clock starts the day you file the return, or on its due date if you filed early (Publication 583). A return filed late, or on extension, starts it the day it is actually filed (26 U.S.C. 6501(a)). A return never filed never starts it.

Filing an amended return does not start a new three years; the original filing date still sets the clock. The one exception: a signed amended return showing more tax, received in the last 60 days of the period, extends it to 60 days after the IRS receives it (26 U.S.C. 6501(c)(7)).

Business returns add a second clock, because owners report the entity's numbers on their own returns:

So an S corporation's records stay open until 3 years after the last shareholder's return was due or filed, whichever is later, and a partnership's until the same point for the partnership return and every partner's return. A partnership under the centralized audit regime also stays open for IRS adjustments until 3 years after the latest of its return's filing date, its due date or an administrative adjustment request it files, with longer periods in some cases (26 U.S.C. 6235).

How long do employment tax records last?

Keep employment tax records at least four years after the tax is due or paid, whichever is later (26 CFR 31.6001-1(e); IRS). The IRS page counts the four years from filing the fourth-quarter return for the year, which usually gives earlier quarters a later end date. A quarter with no payroll return filed has no time limit, so keep its records until the late return is filed and its own period has run. For a payroll refund, credit or abatement claim, keep the claim's records at least four years after the claim is filed.

Records behind qualified sick and family leave wages for leave taken after March 31, 2021, and employee retention credit wages paid after June 30, 2021, should be kept at least 6 years (IRS). For the employee retention credit, the assessment period ends no earlier than 6 years after the latest of the original return's filing date, its deemed filing date or the date the credit claim is made, so count from there (26 U.S.C. 3134(l)). Which payroll records, and in what form, is in payroll records retention.

How long should I keep records of equipment and other property?

Keep property records until the period closes for the year you sell it or otherwise dispose of it in a taxable disposition, not the year you bought it (Publication 583). They prove the depreciation you claimed and the basis (generally cost plus improvements, less depreciation you claimed or could have claimed (Publication 551)) used to figure gain or loss on a sale. Keep purchase invoices, improvement costs and depreciation schedules; entity return instructions say the same (Form 1120-S instructions).

• Nontaxable exchange: keep the records on the old property and the new property until the period closes for the year you dispose of the new property.
• Vehicle: also keep records of business use for each year the vehicle is depreciated (Publication 463); the disposal-year rule above still applies.

Which business records should I keep the longest?

Filed returns, the books of account, owner basis records and records behind a loss or credit carried forward outlast ordinary receipts, because later returns lean on them. The sources below give none of them a fixed end date.

• Filed returns: the IRS says to keep copies, because they help with later and amended returns (IRS). Keep proof of the filing date too, such as the e-file acceptance or the mailing receipt, because the filing date starts the clock.
• Books of account: ledgers and journals are kept as long as their contents may become material in administering any tax law (26 CFR 1.6001-1(e)).
• Owner basis records: an S corporation shareholder or a partner is responsible for keeping the record needed to figure basis in the stock or partnership interest (Form 7203 instructions; Partner's Instructions for Schedule K-1). A corporation should also keep minutes of its board meetings (Publication 583).
• Losses and credits carried to later years: records behind a loss or credit still being carried forward may become material in the later year that uses it. The regulation sets a test, not a fixed number of years, so the safer reading is to keep them until that later year's period has closed (26 CFR 1.6001-1(e)).

What if I close or sell the business?

Closing or selling does not shorten any period in this guide. The IRS tells owners who close to keep property records until the period closes for the year of disposal and employment tax records at least four years (IRS: Closing a business).

• Who can still be billed: closing does not end tax for a year the IRS can still assess. Owners who received the company's assets can be liable as transferees until one year after the company's assessment period ends (26 U.S.C. 6901(c)), and a person responsible for unpaid withheld payroll tax can owe it personally (26 U.S.C. 6672). Keep the closed company's records through that extra year.
• Final returns: the final income tax return starts its own three-year clock when filed. Final payroll returns follow the four years payroll rule.
• Payroll records: a final Form 941 or 944 carries a statement naming who keeps the payroll records and where.
• A sale: keep the sale agreement, the price allocation and the basis records until the period closes for the sale year. If the price is paid over several years, later returns that report the sale rely on them too: records stay while their contents may become material (26 CFR 1.6001-1(e)), and each return's own period applies (IRS Topic 305).
• Accounting software: export every open year before cancelling it. See records to keep when cancelling accounting software.

The filing steps are in closing a company and selling your business.

What if I never filed a year?

A year with no return has no time limit: the clock never starts, so the IRS can assess tax for it at any time (26 U.S.C. 6501(c)(3)). Keep every record for that year at least until the late return is filed and its own period has run. A late return starts the usual clock the day it is filed.

How far back the IRS expects missing returns, and in what order to file them, is in catching up on unfiled business returns. That does not shorten the no-limit rule above, so keep every record for the missing years. If the books are missing, see rebuilding books from bank statements.

Do lenders, insurers or states require longer?

They can. When records are no longer needed for tax, check before discarding them, because insurers or creditors may require them longer than the IRS does (Publication 583). Loan agreements, leases and insurance policies may state their own periods.

State tax agencies set their own limits for state returns, and some run longer than the federal default. California is one: its Franchise Tax Board says the usual period is four years from the due date or the filing date, and longer in some cases, such as a federal audit or a large omission of income. Check the tax agency of each state where the business files.

Example

These examples are illustrative; amounts are in US dollars.

A freelancer's receipts and a sold laptop

A freelancer files her 2023 return on April 10, 2024. The due date was April 15, 2024, so the clock starts then. Unless a longer period applies, ordinary 2023 receipts and bank statements are kept until April 2027.

She buys a US$1,800 laptop in 2023 and sells it in 2026. Its records follow the sale year:

• 2023: bought and depreciated.
• 2024 and 2025: still used.
• 2026: sold. The sale year sets the clock.
• April 2027: the 2026 return is filed.
• April 2030: the earliest the laptop records can go.

A restaurant owner closes with employees

A restaurant owner closes in December 2026 after paying final wages. The last quarterly payroll return falls due at the end of January 2027, and the tax is paid by then. Payroll records stay at least four years after that, into early 2031; if the tax is paid later, the four years run from the later date. The final return names who holds them and where.

A consultant left income off a return

A consultant files her 2023 return in April 2024 showing US$120,000 of gross income. She later finds she left out US$40,000 and disclosed it nowhere on the return. A quarter of US$120,000 is US$30,000, so the US$40,000 is over the line. The assessment window is six years, not three, so all of her 2023 records stay until April 2030, not only the records for the missing income.

Different for you?

• You are closing or selling the business, or clearing out boxes, and cannot tell which years are still open. The answer turns on each return's filing date, any unfiled year, foreign accounts and equipment you still depreciate. Sorting records by year before anything is shredded or an account is cancelled is bookkeeping work: get bookkeeping help, and see closing a company.
• You got an IRS letter or notice about a year: keep every record for that year even if the usual period has passed, and see an IRS notice to your business. Sorting what you have by year before you reply is bookkeeping work: get bookkeeping help.
• A year was never filed: use catching up on unfiled business returns, and get bookkeeping help if the records are incomplete.
• Income was left off a return already filed: see amending for income left off past returns.
• The business or its owners hold a foreign account or a foreign company, or a foreign person owns the US company: see which accounts count on an FBAR, information forms for a foreign company and records for a foreign-owned LLC.
• Equipment records are missing: see rebuilding a missing depreciation schedule.
• Receipts are lost, or you want to scan and discard paper: see lost receipts, scanned receipts instead of paper and penalties for not keeping records.
• You rent out property: see rental property records and receipts.
• You also file in Canada, or the business is Canadian: the CRA has its own period, see how long to keep business records in Canada. Records for each country's return follow that country's rules.