The amount of time you must preserve records is determined by the activity or expenditure that each document documents. Certain documents may need to be kept indefinitely, but for company taxes, you normally only need to maintain records supporting income or deductions on a return until the time of limitations for that return expires. The statute of limitations refers to the amount of time you have to revise a tax return in order to get credit or a refund. Even if you no longer need the documents for tax reasons, you should maintain them because other organizations may demand them.
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According to the IRS, the following are some of the normal restriction periods for tax-related documents:
Keep documents for three years if you owe more taxes.
Keep records for 6 years if you do not declare revenue that should have been reported and it exceeds 25% of your gross income on your return.
If you submit a fake return, retain records for the rest of your life.
Keep records forever even if you do not submit a return.
If you submit a credit or refund claim after filing your return, retain records for three years from the date of filing the original return.
Keep records for 7 years if you make a claim for a loss owing to a bad debt deduction or worthless securities.
When the tax is owed or paid, keep all employment records for at least four years.
Some company documents should be retained indefinitely:
Audit reports and balance sheets
Checks for essential payments were canceled.
Capital stock and bond records
Cash registers
Contracts and leases are still in force.
Legal communication
Bills of sale, deeds, and mortgages
Financial statements at the end of the fiscal year
Insurance documentation
Charters, bylaws, and minutes
Property valuations and documentation
Federal and state income tax returns
Registration of trademarks
Some records are typically preserved for just seven years:
Accident reports and insurance claims
Accounts payable and receivable ledgers and schedules
Account statements
The majority of canceled checks
Contracts and leases that have expired
Inventory of products, materials, and supplies
Invoices from customers and vendors
Notes receivable ledger and schedules
Records with options
Payroll account information
Orders for Purchase
Sales figures
Stock and bond certificates that have been cancelled
Vouchers
