You’ve been diligently saving your expense receipts for business, just like all the blogs tell you to do. Heck, you’ve even saved every ATM receipt for the past ten years. Eventually you’re going to wonder, “How long do I have to save this stuff?”
As with so many things in business, the answer is … it depends! There are no hard and fast rules, but there are some general guidelines out there for how long you should keep your business receipts and documents:
About a Month — Deposit receipts from your bank can be shredded once you’ve confirmed that they are reported correctly on your bank statement. The same rule applies for ATM receipts.
1 Year — If you still use a book of deposit tickets with duplicates, I recommend saving the duplicate deposit slips for one year. This is a personal preference, but it has come in handy for me when I’ve had to dig through records to double-check my deposit records in QuickBooks. I also recommend saving Purchase orders from your customers that authorized your work for at least one year past the end of the contract.
3 Years — Receipts for deductible business expenses, Cancelled checks (if your bank still sends them back to you!), Paid vendor invoices, Expired insurance policies, 1099s received from your clients. Basically, you need to back up the income claimed on your tax returns and the expenses deducted on your tax returns for three years from the date your tax return was filed. The standard timeframe for an IRS audit can be extended from three years to six years in certain cases, though, as explained below.
6 Years — Sales records & invoices, Bank statements, Auto mileage logs, Travel & entertainment records. You might also want to consider saving all of the “Keep for three years” documents for a full six years. If the IRS suspects that you substantially underreported your income, they can audit you for up to six years from the time you filed. If you’ve already shredded your receipts by then, you’ll be out of luck!
Forever — Copies of tax returns, Tax/legal correspondence, Contracts/leases, Real estate records, Corporate minutes & stock records, Partnership documents and other contracts.
Generally, retention guidelines are the same for computerized records as for paper copies. But it’s important that you can retrieve what you need and that the IRS can access those records. In other words, your best bet is to save the documents as a PDF, a universally accepted format. And always remember to keep off-site backups!!
Do you have any questions I haven’t’ covered? Leave a comment below to let me know what you think!
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.