Tax Records for Small Business

If you are due a refund or credit, keep business records for three years from the date you filed your original return or two years from the date you paid the tax (whichever is later). Kyle Pearson, CPA and owner of Collective CPAs + Advisors, says this refers to items like your W-2s, 1099s, backup records for your deductions, etc.

Keep employment tax records for at least four years after the tax was due or paid, whichever is later.

Pearson says you should keep “any tax returns with single items that, if changed under audit, could create a change to reported income of 25% or more, for up to seven years.”

If you file a claim for a loss from worthless securities, bad debt, or a loss deduction, keep your records for seven years.

Pearson adds that you should keep “records of property or investment purchases that you still hold. You’ll need that cost info when you eventually sell them.”

Legal and Business Documents

• Keep copies of insurance documents for 10 years after the policies expire. Any paperwork regarding insurance claims should be kept indefinitely. 
• Legal documents, such as canceled leases and notes receivable, should be kept for 10 years after cancellation.

There are some documents you should keep indefinitely, such as:

• Financial documents (audit reports, annual financial statements, general ledgers, bank statements, journal entries, cash books, charts of accounts, check registers, subsidiary ledgers, and investment documentation)
• Corporate documents (articles of incorporation, charter, constitution, bylaws, minutes)
• Stock records (if your company is incorporated)
• Licenses, patents, trademarks, and registration applications
• Bills of sale, permits, licenses, contracts, deeds and titles, and mortgages

Don’t Toss It! Digitize it!

And those receipts should be digitized. Pearson recommends using Dext, a receipt digitization tool for maintaining purchase receipts. He adds that you can also use Google Drive, Dropbox, Box, or other similar cloud services to retain these records digitally. Pearson says, “The key is proper organization when setting a file structure. Keep documents sorted by year and category to make searching and finding documents you need to reference easier.”

And, if your documents and records aren’t in the cloud, you should upload them there.

Recordkeeping requirements differ from state to state and can change yearly. So check with your accountant and attorney on what to keep. It could save you major headaches down the road.

Learn more tips for running and growing your small business at Index by Pinger.