The general rule is tied to what the record proves
The IRS says businesses should keep records as long as they may be needed to substantiate income, deductions, credits, basis, and other items reported on a return. There is no universal 'seven-year rule' that fits every business document.
Common federal income-tax periods
For many ordinary income-tax records, the IRS describes a three-year period when special situations do not apply. The period can become six years when more than 25% of gross income is omitted, seven years for certain bad-debt or worthless-security loss claims, and indefinite when no return is filed or a fraudulent return is filed.
Employment tax records
Keep employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Those records include wage and employee information, Forms W-4, dates and amounts of tax deposits, and supporting payroll documentation.
Property records last longer
Records connected to property should generally be kept until the limitation period expires for the year in which the property is disposed of, because the company may need the historical acquisition cost, improvements, depreciation, and other basis information to calculate gain or loss.
Build a policy, not a box of receipts
Organize records by tax year and type: filed returns, bank statements, invoices, receipts, payroll, fixed assets, ownership, and material contracts. Keep permanent entity documents separately from routine transaction support. When a tax retention period ends, check legal, insurance, lender, grant, and contractual requirements before destroying records.
Decide who owns deletion as well as storage
A retention policy should identify the record category, authoritative storage location, minimum retention rule, access restrictions, and the person allowed to approve disposal. Automatic deletion can be useful only when the policy accounts for litigation holds, audits, notices, lender requirements, insurance claims, grants, contracts, and other reasons a document may need to be kept longer.
Backups are not a substitute for an organized archive. The company should be able to retrieve a filed return, payroll record, material contract, or asset schedule without restoring an entire system image. Periodically test retrieval, especially before changing accountants, payroll providers, document systems, or other services that may hold company records.