Tax returns can generally be audited for up to three years after filing and up to six years if the IRS suspects underreported income. It is wise to keep tax records at least seven years after a return is filed. Requirements for records kept electronically are the same as for paper records.

Generally, follow these recommended periods for various documents:

BUSINESS
Accounting Records Retention Period
Accounts payable…………..……..……….7 years
Accounts receivable…………………...…..7 years
Audit reports…………………………..Permanent
Chart of accounts………………….…..Permanent
Depreciation schedules………………..Permanent
Expense records…………………………...7 years
Financial statements (annual)………....Permanent
Fixed asset purchases……………….....Permanent
General ledger………………………....Permanent
Inventory records………………..……….7 years1
Loan payment schedules…………………..7 years
Purchase orders (1 copy)……………...…..7 years
Sales records………………………………7 years
Tax returns………………………….…Permanent

Bank Records Retention Period
Bank reconciliations………………………2 years
Bank statements…………………………...7 years
Cancelled checks………………………....7 years2
Electronic payment records……………….7 years

Corporate Records Retention Period
Board minutes………………………....Permanent
Bylaws……………………………..….Permanent
Business licenses………………...…….Permanent
Contracts-major…………………...…Permanent
Contracts-minor…………….……Life + 4 years
Insurance policies………………....Life + 3 years3
Leases/mortgages………………..…….Permanent
Patents/trademarks…………….............Permanent
Shareholder records…………….……. Permanent
Stock registers………………………....Permanent
Stock transactions……………………. Permanent

Employee Records Retention Period
Benefit plans…………………………..Permanent
Employee files (ex-employees)……......…7 years4
Employment applications………………....3 years
Employment taxes……………………...…7 years
Payroll records………………………….....7 years
Pension/profit sharing plans…………...Permanent

Real Property Records Retention Period
Construction records……………….….Permanent
Leasehold improvements…………...…Permanent
Lease payment records………….....Life + 4 years
Real estate purchases……………….…Permanent

1Permanent for LIFO system.
2Permanent for real estate purchases.
3Check with your agent. Liability for prior years can vary.
4Or statute of limitations for employee lawsuits.