How Long Should a Business Keep Records?

 |  Business Management, Income tax, Tax

According to the IRS, you should keep records for three years from the date you filed your original return or 2 years from the date you paid taxes, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for seven years if you file a claim for a loss from worthless securities or bad debt deduction. Also, you should keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return.
The length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you must keep records that support an item of income, deduction, or credit shown on your tax return until the period of limitations for that tax return runs out. Employment tax records should be kept for at least four years after the date that the tax becomes due or is paid, whichever is later.
The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax. The information below reflects the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.
Records Connected to Property
Generally, keep records relating to property until the period of limitations expires for the year in which you dispose of the property. You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.
If you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property.
Records for Nontax Purposes
When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. For example, your insurance company or creditors may require you to keep them longer than the IRS.

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