How Long Should You Retain Company Tax Records?

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.

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