What Records Should You Actually Be Keeping (and for How Long)?

If you've ever opened a filing cabinet or a cluttered digital folder and wondered whether you actually need everything in there, you're not alone. One of the most common questions we hear from business owners is how long they should really be holding onto financial records. The good news is there's a clear answer, and once you know it, staying organized becomes a lot less stressful.

The General Rule

For most tax records, the IRS recommends keeping documents for at least three years from the date you filed. This is generally the window the IRS has to audit a return under normal circumstances.

When You Should Keep Records Longer

There are a few situations where three years isn't enough:

🧾 If you underreported income by 25% or more, the IRS can go back six years

🧾 If you didn't file a return at all, there's no time limit

🧾 If you claimed a loss from worthless securities or a bad debt deduction, keep those records for seven years

🧾 Records related to property, like your home or business equipment, should be kept for as long as you own the asset, plus three years after you sell it

What You Should Actually Be Saving

• Income records (1099s, W-2s, invoices, bank deposits)

• Expense receipts and business purchase records

• Bank and credit card statements

• Payroll records

• Prior tax returns and supporting documents

• Records tied to major purchases, like vehicles or property

Why This Matters

Keeping the right records isn't just about surviving an audit. It also makes tax time faster, helps you catch errors before they become expensive, and gives you a clear picture of your business's financial health throughout the year.

If you're not sure whether something is safe to shred or should stay in the file, it's always better to hold onto it a little longer than you think you need to.

With over 35 years of experience helping Tennessee business owners stay organized and audit-ready, our team can help you figure out exactly what to keep, what to let go of, and how to build a system that works for you.

Give us a call today at (615) 773-2736. We're here to help.

Frequently Asked Questions

How long should I keep my tax returns?

At least three years, though many people choose to keep them for six to seven years for added peace of mind.

Can I keep records digitally instead of on paper?

Yes. Scanned copies and digital backups are acceptable, as long as they're clear and easy to access if needed.

What happens if I get audited and don't have a record?

Missing documentation can make it harder to support a deduction or income figure, which may affect the outcome of the audit.

Do I need to keep records for a business I've closed?

Yes. You should still keep relevant records for at least three years after the business closes or the final return is filed.

What's the safest way to store sensitive financial documents?

A locked filing cabinet for paper records and a secure, backed-up digital storage system for electronic files are both good practices.