The IRS is the main reason business owners ask this question, so let’s start there. The standard audit window is three years from the date you filed your tax return. But three years is only the baseline. If the IRS believes you underreported income by more than 25%, that window extends to six years. If you claimed a loss from bad debt or worthless securities, keep those records for seven years. And if you never filed a return or filed a fraudulent one, there is no time limit at all.

For practical purposes, seven years is the safe default for anything related to taxes and finances. That covers the longest non-fraud window and gives you a comfortable buffer.

Here’s how it breaks down by record type. Bank and credit card statements should be kept for seven years since they prove income and expenses if your return gets questioned. Receipts for deductible expenses follow the same rule. Without documentation, deductions can be disallowed entirely during an audit.

Payroll records need to be kept for at least four years after the tax is due or paid, whichever is later. The IRS requires this, and the Department of Labor has its own retention requirements that overlap. If you’re running full-service bookkeeping, payroll documentation should already be organized and stored properly as part of that process.

1099s and W-2s you’ve issued or received should be kept for seven years. Same with accounts payable and receivable ledgers.

Business asset records are different. Purchase documents, improvement costs, and depreciation schedules need to be kept for the entire time you own the asset plus seven years after you sell or dispose of it. This documentation proves your cost basis when calculating gains or losses.

Contracts and leases should be kept for the life of the agreement plus seven years. Corporate formation documents, operating agreements, and meeting minutes should be kept permanently. These establish the legal structure of your business and never stop being relevant.

Tennessee’s franchise and excise tax filings can be audited up to three years back by the Department of Revenue, so the seven-year default covers state requirements comfortably as well.

The simplest approach is to default to seven years for almost everything financial, keep asset records for the life of the asset plus seven, and keep legal documents forever. Going digital makes this easy. Scan paper receipts and invoices, back up your accounting file regularly, and use cloud storage so nothing gets lost to a hard drive failure or a box in a damp garage.

If your records are a mess right now and you’re not sure what you have or what’s missing, working with a bookkeeper in Franklin to get things organized is worth doing before it becomes a problem during an audit or a sale of the business.