If you’re like most business owners, you’ve started boxing up files, paperwork, and payroll records for 2016 to make room for what will come in 2017. These boxes can take up a lot of space and collect dust—whether you’re paying for off-site storage or keeping them in your office. Is there anything from 2016 that you can get rid off? How about those boxes marked 2015, 14, 13 and beyond? Read on to learn which records you should keep for your business taxes and for how long.
IRS Guidelines on Record Keeping
The IRS states “You must keep your records as long as they may be needed to the administration of any provision of the Internal Revenue Code.” Generally, this means you must keep records that support and itemize income or deductions on a return until the period of limitations for that return runs out. What is the period of limitations? That is the time frame for which you can amend your return to claim a refund or credit. If you fail to file a return or file a fraudulent return, then there is no time limitation.
Keep Tax-related Records for 7 Years
As a general rule of thumb, you should keep any records that support a tax return for seven years after the return is filed. Documents you should keep for your business taxes include, but are not limited to:
- accounts payable & receivable ledgers
- cancelled checks
- payroll records
- garnishment records
- expired contracts
- notes receivable records
- terminated employee files
Keep “Everyday” Paperwork for 3 Years
Hold onto to these non-tax-related documents for three years:
- bank reconciliations and statements
- bank deposit slips
- employment applications
- sales commission reports
- petty cash vouchers
- employment applications
Keep These Documents for the Life of Your Business
You’ll want to permanently keep any documents that directly relate to the formation of your business, any property your business owns, contracts your business has entered into, or tax records, including:
- formation documents
- audit reports
- current contracts or leases
- legal correspondence
- year-end financial statements (since inception)
- tax returns
- trademark registrations
- property records
Know Your Industry’s Record-Keeping Standards
The IRS is not the only agency that has record retention standards for businesses. Insurance companies, state agencies, healthcare regulators, etc. all have their own set of record retention standards.
Before you head to the paper shredder, be sure to check the record-keeping standards of your industry’s regulatory agencies and organizations.There are a number of Record Retention Schedules available on the internet, including a fairly comprehensive one from the Better Business Bureau.
Check Before You Shred
As much as we all want to reduce clutter and free up valuable space (both physical and digital), it’s better to hang on to something until you can confirm it’s safe to discard, than to shred it and realize you need it later. The information shared above is meant to provide general guidelines on which records you should keep for your business taxes. If you have a unique situation, or have questions, consult an accounting professional.
Business Accounting Services in NH
Fournier Accounting and Bookkeeping Services provides professional advice and support to businesses throughout New Hampshire and beyond. We’re here to help you manage your books so you can give your customers the care and attention they deserve. Call us at 603-321-6420 or visit us online to learn how we can help you.