How long should a business keep tax and accounting records?

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.

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.

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.

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.

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.