Business Documents: What To Keep and for How Long?

As a business owner, chances are you have plenty of documents, files, folders, receipts, and so on. It can be hard to know what to keep and for how long. In general, the rule of thumb for saving files is it's better to be safe than sorry, as you’ll likely need to have quite a bit of documentation on hand to properly file your corporate taxes or justify your filings in the case of an audit.

In this Tally Services blog, we’ll cover some of the specifics and help you determine what business documents you need to keep on hand. Businesses can choose whatever organizational system makes sense for them, as long as it meets the requirements set forth in the IRS’s Publication 583 relating to business records.

In large part, businesses should keep track of the following kinds of supporting business documents:

Gross Receipts
Any receipt related to the income your business collects. This can include everything from cash register receipts, deposit slips, invoices, and so on. These are used in your tax filings to prove how much money your business took in.

Purchase Records
Similar to income, you also need to account for any items you buy. This includes any raw materials, supplies, or items you resell to customers. Documentation might include credit card receipts or statements, invoices, store receipts, and so forth.

Expense Records
Aside from what items you purchase to run your business, expenses include the things you must pay for to run your business. This may include things like rent, equipment, marketing, electricity, and so on. Records of these expenditures can include receipts, invoices, credit card receipts or statements, and the like. 

Travel, Transportation, Entertainment, and Gift Expenses
If you are going to deduct travel, transportation, entertainment, and gift expenses, you must maintain documentation to prove these expenditures. This can include receipts, invoices, records, and so forth, but they must show the cost is a legitimate business expense.

Assets
Accounting for assets includes any machinery, equipment, furniture, or vehicles your business owns and uses in the operation. You must keep records of ownership and depreciation for tax purposes. This can include records such as purchase price, cost of improvements, records of any loss, records of sales, and so on. 

Employment Taxes and Records
There are many types of records you should keep relating to your employees and related taxes paid. You must keep a thorough list of things such as the amounts and dates of wages, employee identification numbers, dates of employment and more. See the full list here.

How Long to Keep Business Records
If you’re wondering how long the business must keep records, the answer varies based on the type of record in question. You must keep records of assets for as long as you own them, but other documentation has specific date ranges. The safe, accepted answer is to keep any form of record for at least 7 years; to see specific requirements see the full IRS guideline here. Keeping your documents on hand will help make your filings easier and will help you prove your earnings and expenses in the case of an audit.

Does your small business need help getting your records in order, or creating a system to keep them that way? Let’s work together to set your business up for success. The accounting professionals on the Tally Services team are here to help you determine and implement the accounting practices that will help keep your business up and running, and keep you focused on growing the business. Tally Services partners with businesses of all sizes to provide top-notch accounting and bookkeeping services. Contact us today to get started!