As a small business owner, knowing how long to keep specific documents can help you manage your business more efficiently. Here’s the recommended retention periods for common financial documents:
- Financial Receipts – Retention Period: 3 to 7 years
The IRS has a three-year window to audit a tax return, but this period extends to six years if income is underreported by more than 25%. Keeping receipts for seven years provides a buffer. - Canceled Checks – Retention Period: 3 to 7 years
Most banks store digital copies of checks, but it’s wise to keep any that pertain to taxes, major purchases, or legal agreements for at least three years, or seven if tied to tax filings. - Invoices – Retention Period: 7 years
Invoices are part of your income records, so it’s best to keep them for seven years to cover potential audits or legal inquiries. - Tax Returns and Supporting Documents – Retention Period: 7 years
While the IRS suggests keeping tax returns for at least 3 years, 7 years covers extended audits and any potential questions regarding deductions or income discrepancies. - Payroll Records – Retention Period: 7 years
Payroll records are essential for IRS compliance, as well as for employee or contractor disputes, so they should be kept for at least 7 years. - Bank Statements – Retention Period: 3 to 7 years
Like checks, statements should be kept for 3 to 7 years, particularly if they relate to tax filings or financial audits. - Legal and Business Documents – Retention Period: As long as they’re active + 7 years
Keep these for the duration of the contract or lease and for seven years after expiration. If a contract is tied to a property or long-term agreement, consider keeping it indefinitely. - Employee Records (If Applicable) – Retention Period: 4 to 7 years after termination
For compliance with federal and state labor laws, it’s recommended to keep employee records for at least four years, and seven for tax purposes.