It is always a good time to organize and declutter your tax and financial records. Whether you’re sorting through physical files or managing digital folders, knowing what to keep—and for how long—can help you stay compliant and avoid unnecessary headaches during audits or future filings.  If you have paper receipts, scanning and saving to a secure location is a great way to declutter, while still complying with record retention guidelines.

A General Guide to Record Retention Guidelines

As a rule of thumb, keep any records that support information reported on a tax return for at least three years from the date filed. That’s typically the window the IRS has to initiate an audit. However, there are several exceptions to this three-year guideline:

  • If your income is underreported by more than 25%, the IRS has six years to take action.
  • If you paid a balance due, or requested a refund late, keep for the later of three years from filing date or two years from the date paid/requested.
  • There’s no time limit for the IRS to act if a return is never filed or is deemed fraudulent.  This includes failing to file foreign information returns.
  • If you claimed a worthless security or bad debt deduction, the records should be kept for seven years.
  • To be safe, we recommend holding on to most business tax records for at least seven years and keeping copies of filed returns indefinitely.

Business-Specific Retention Guidelines

For business owners, additional rules apply depending on the type of documentation:

  • Property records: Maintain documents that support your cost basis, depreciation, and eventual sale of the asset. Hold these for as long as you own the property, plus seven years after disposition.
  • Employee and payroll records:
    • Retain records of earnings and withholdings for at least four years after the tax becomes due or is paid.
    • Keep employee records for at least three years after an employee leaves the company.
    • This ensures compliance with both IRS and Department of Labor requirements.
  • Travel and business expense records: Maintain receipts, mileage logs, and related documentation for at least three years, in line with audit timeframes.
  • Sales tax filings: These vary by state, but most jurisdictions recommend retaining records for three to seven years. Be sure to check with your specific state’s tax authority.

When In Doubt, Follow Conservative Retention Guidelines

If you’re not sure whether a document is worth saving, err on the side of caution and retain it for seven years, unless it’s a filed tax return—in which case, you should never discard it. In some situations, industry-specific or state-level record retention guidelines may require even longer retention.

Following clear and consistent record retention guidelines will help you manage your business documentation with confidence. If you do find old documents that can be disposed of, you should do so securely by shredding.  If you need help setting up a policy or reviewing your current practices, our team is here to assist.

Connect with your ML&R advisor to ensure your record retention strategy supports compliance and peace of mind.