How Long Should a Small Business Keep Tax Records?
Short answer
Keep most income tax records for at least 3 years after you file. Keep payroll (employment tax) records for at least 4 years after the tax is due or paid, whichever is later. Keep records 6 years if you may have left out more than 25% of your income, 7 years for a bad-debt or worthless-securities deduction, and indefinitely if a return was never filed.
The IRS retention periods at a glance
- 3 years — the general rule for income tax records, measured from the date you filed (or the due date, if you filed early).
- 4 years — employment tax records, measured from when the tax was due or paid, whichever is later.
- 6 years — if you left out income that is more than 25% of the gross income shown on the return.
- 7 years — if you claimed a deduction for a bad debt or a worthless security.
- Indefinitely — if you didn't file a return, or filed a fraudulent one.
Records tied to property last longer
For equipment, vehicles, and real estate, keep the purchase records until the retention period runs out for the year you sell or dispose of the property. You need them to calculate depreciation and gain or loss.
What counts as a record?
Receipts, invoices, bank and card statements, canceled checks, mileage logs, payroll reports, and the returns themselves. Our guide on which receipts to keep goes item by item, and how to organize business receipts covers simple filing systems.
Digital copies are fine
Clear, legible scans or photos stored in an organized system are generally acceptable. Back them up in two places, and make sure you can pull a specific receipt quickly if you're ever audited.
Other agencies may want more
The IRS rules are a floor. Lenders, insurers, landlords, and state agencies can require longer retention, so check before you shred.
A simple habit that works
At year-end, archive the year's records in one labeled folder alongside the filed return, then set a calendar reminder for the date it can be purged. Pair this with a year-end bookkeeping checklist so nothing slips.
Not sure your records would hold up?
We can review your recordkeeping and set up a system that keeps you audit-ready.
Frequently asked questions
How long do I need to keep business receipts?
For income tax purposes, generally at least 3 years from the date you filed the return. Some situations require longer, such as 6 years if income was substantially underreported.
How long should I keep payroll records?
The IRS says to keep employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.
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