How long should I keep business receipts and records?
The IRS standard is three years from the date you filed the return. That is the normal window they have to audit you. But there are exceptions that extend that timeline, which is why most accountants recommend keeping everything for at least seven years.
If you underreported your income by more than 25%, the IRS has six years to audit. If you never filed a return or filed a fraudulent one, there is no time limit at all. Since you don’t always know which category you fall into until years later, seven years covers you in most realistic scenarios.
Employment and payroll records should be kept for at least four years after the tax was due or paid, whichever is later. If you have W-2 employees or pay subcontractors, keep those 1099s, pay stubs, and payroll reports for at least that long. California has its own requirements through the EDD that align closely with this timeline but can vary for certain wage records.
Some records should never be thrown away. These include your business formation documents, articles of incorporation or LLC operating agreements, property and equipment purchase records, and prior year tax returns. Asset records in particular need to stick around for as long as you own the asset plus seven years after you sell or dispose of it. If you bought a truck in 2019 and sell it in 2027, you need the purchase records through at least 2034 so you can support the depreciation and any gain or loss on the sale.
For construction and contracting businesses, the records that matter most beyond receipts are job contracts, change orders, subcontractor agreements, and lien releases. These can come back up in disputes or audits years after a project is finished. Keep them for at least seven years after the project closes out.
The practical side of this is just as important as knowing the timeframes. Paper receipts fade and get lost. Scan or photograph everything and store it digitally with some basic organization by year and category. Cloud storage or a receipt scanning app connected to your accounting software makes this much easier than shoebox filing.
A Long Beach bookkeeper familiar with trade businesses can help you set up a system that captures what you need without creating extra work. The goal is to have clean records available if you ever need them, whether for an audit, a loan application, or just answering a question about what happened two years ago. Once your retention period is up, you can safely shred old documents, but when in doubt, keep it longer rather than shorter.
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