If you do end up going the paperless route, remember to keep a backup copy of your documents in a secure second location, like a password-protected hard drive, or a secondary cloud storage service. Digitizing your records is also a great way to avoid accidentally tossing them in a move or an overzealous fit of spring cleaning. Plus, let’s not forget that paper records can fade, and are susceptible to damage. This is mainly due to the Period of Limitations, which is the time during which you can amend your tax return, or during which the IRS can perform an audit on your return. If you’re still not sure about which small receipts to keep, you can review the IRS guidelines on proving expenses under $75 here.

• Having accurate information handy helps ensure that you pay what you owe—but not more.
• If you ever face a tax audit, then you’ll have all the information you need.
• Throwing away documents with your trash exposes your information to anyone willing to do a little dirty work to steal your identity.
• Or you can download digital records and store them on your computer or mobile device.
• For instance, using a device or computer that has updated malware protection, changing your password often, and refraining from using devices you don’t trust.
• Some external agencies, such as the Payment Card Industry Security Standards Council (PCI SSC), require businesses to keep documents for PCI compliance.
• If you have an expense that is less than $75, you don’t need to have a receipt to support it.

Worthless securities or bad debt deduction

We not only complete your bookkeeping and taxes, but we also provide easy access to tax returns and other important business documents. Documents such as tax returns, receipts, bank statements, or pay stubs can also be kept in a safe deposit box or simply a locked how long to keep business financial records file at home. For electronic documents, store them in a password-protected folder on your desktop or another secure location. Businesses of all sizes are required to keep up-to-date records that reflect their gross income, expenses, deductions, and transactions.

A Beginner’s Guide to Record-Keeping for Small Businesses

• That’s why most accountants recommend that you hold on to your tax return and all supporting documentation for seven years from filing.
• For example, if you question a specific transaction, you can begin with a phone call, but you’ll want to send a follow-up letter or email.
• In this guide, we’ll walk you through which records you’re legally required to keep, how long you should keep them, and how to make sure you don’t lose them.
• He has been quoted by publications like Readers Digest and The Wall Street Journal.
• Your specific system and guidelines will depend on your business’s resources and available time.

Maintain documents until you’ve confirmed any requirements with your creditors and insurers. When you’re running a small business, you have myriad things to worry about on a daily basis, so keeping detailed records may be the last thing on your mind. The IRS, however, requires that you maintain key records for specific lengths of time. It’s crucial to hang onto records that reflect your income and deductions in case your business is audited, and also to protect yourself and your business against any legal or insurance issues. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.

If you have records connected to property

‘Inc.’ in a company name means the business is incorporated, but what does that entail, exactly? Here’s everything you need to know about incorporating your business. If you are keeping evidence for a meal, you’ll want to have a receipt that shows the name and location of the restaurant, the number of people served, the date of the meal and the cost. We recommend scanning every record and receipt in your business, tagging it with a descriptive name, and archiving it forever. Keep in mind that what follows is just general guidance and not necessarily the final word. Your accountant or tax advisor may have different recommendations for your situation.

• If you do end up choosing a digital storage solution, make sure you don’t need a physical copy or original document in the future.
• It’s important to make sure that whoever would need to pay the bills and find these types of documents can access them easily.
• He is the founder of the award-winning blog, Family Money Adventure, and host of the Family Money Adventure Show podcast.
• The length of time you should keep a document depends on the action, expense, or event the document records.
• Kevin’s work has been featured in Bankrate, Credible, CreditCards.com, Fox Money, LendingTree, MarketWatch, Newsweek, New York Post, Time, ValuePenguin and USA Today.
• In some cases, electronic is preferred, since paper receipts can fade and become illegible over time.
• In general, the IRS requires businesses to keep records until the period of limitations, or statute of limitations, runs out.

Keep until warranty expires or can no longer return or exchange

Your best option is to shred any documents that contain sensitive information before tossing them. Either invest in a shredder for your home or utilize a professional shredding service. You will likely pay a fee for this service, but it’s a small price to keep your personal information safe. If you do end up choosing a digital https://www.bookstime.com/articles/accrual-to-cash-conversion storage solution, make sure you don’t need a physical copy or original document in the future. The last thing you want to do is shred something to save space, only to need it five years later. Whether you have paper documents or electronic versions, here are options for storing your financial documents safely long term.

How long do you have to keep business records if the business closes?

The Benefits of Record Keeping