How Long One Should Keep Business & Tax Records?

Tax year has ended and everybody is gearing up for the tax payment season. But what about the previous year tax records? If you are wondering how long to keep your tax records and other business records, there are some general rules to follow. Business records should be kept as long as needed but is there a time when you can finally let go of these records especially if you want to clean up your files. Lawyers and bankers generally have different points of view. IRS, on the other hand, has recommended basic retention standards you can follow. Here are some of these standards:

Business Income Tax Records
 A  business should always keep the final copy of their business income tax returns and related documents for future or amended returns. The IRS recommends that businesses keep hold of supportive documents that validate any business income or deductions until the period of limitations has expired for that tax return.

The period of limitation is the time period from the filing date during which IRS may  assess your business for additional tax due. During this time, you can make changes on your return for a credit or refund for additional taxes. Normally, the IRS has 3 years to check on the incomes and returns but f the amount is greater than 25% of your business’s gross income, IRS can chase you up to six years after your filing it.

Employment Tax Records
If you have employees, the IRS suggests that you retain all employee tax records for at least 4 years after filing the 4th quarter for the year. These employment tax records include such items as your employer identification number, amounts and dates of all wage, annuity, and pension payments, amounts of tips, names, addresses, social security numbers, and occupations of employees, dates and amounts of tax deposits you made.

Business Asset Records
If business owns a property, the IRS suggests keeping the records until the period of limitations expire from the year you shelve off a property. These reports will assist you in scheming appropriate depreciation, and to establish any gain or loss on that property. If the business property is a vehicle, keep the vehicle title until you sell or dispose it off.

In general,  it is a good idea to consult with your tax professional to discuss your business taxes and records keeping.  To know more about the managing the business in your state, you can get more help. For instance the Nevada Department of Business and Industry works to promote growth, development, and legal operation of businesses in their state.