Your business has likely collected a lot of financial records over the years. So much so that you’re likely wondering—when can I throw this all away? This is a normal question to ask, and it can be tempting to throw it away at the end of each financial year. Nevertheless, while there are huge differences between your balance sheets and that receipt from Chipotle, they are still both important for tax purposes and must be handled with care.
If you’re sued or audited, then the burden of proof is on you. In that respect, it’s best to keep as much as you can. Even a $20 receipt from Chipotle could be questioned during an audit. Here are the main items you should store away for safe keeping:
- Cash register tapes
- Deposit information
- Bank statements
- Canceled checks
- Credit card receipts
- Petty cash slips
- Accounts payable and receivable
- Payroll records
- W2 and 1099 forms
- Tax filings
- Old tax returns
- Articles of incorporation
- Business permits
- Regulatory documents
- Annual reports
How long to keep tax records and receipts
The majority of your financial documents should be kept for at least three years. Some, however, need to be kept for longer. Tax returns, receipts, and other miscellaneous financial records can be kept for three years. Employment tax records, on the other hand, need to be kept for four years.
Additionally, how you file your tax returns can impact how long you need to keep your financial documents. If you don’t report a source of income on your tax return, for instance, then you’ll need to keep your documents for six years. You’ll also need to keep records for seven years if you deducted the cost of bad debt or worthless securities.
How to keep tax records and receipts
You’re likely wondering how you’re supposed to keep all of these documents for so long without living amongst piles of financial documents. The easiest and simplest way of doing so is to go paperless. As long as your digital copies are identical to their physical counterparts, then the IRS will accept it.