How Long Do You Keep Business Tax Returns?
As a business owner, it is essential to maintain proper records and documentation, especially when it comes to tax returns. The question often arises, “How long do you keep business tax returns?” The answer to this question depends on various factors, including the type of tax return and the specific requirements of the Internal Revenue Service (IRS). In this article, we will explore the general guidelines for keeping business tax returns and address some frequently asked questions regarding this matter.
Generally, it is recommended to keep business tax returns and supporting documents for at least three years. This timeframe allows enough coverage for the IRS to audit your records if necessary. However, there are a few exceptions to this rule. For example, if you have claimed a loss from worthless securities or bad debts, you should keep the tax return for seven years. Additionally, if you have filed a fraudulent tax return, you must retain the records indefinitely.
Here are some frequently asked questions about keeping business tax returns:
1. Can I keep digital copies of my tax returns?
Yes, the IRS accepts digital copies of tax returns as long as they are accurate and complete.
2. Can I throw away my tax returns after three years?
It is recommended to keep tax returns for at least three years, but it is always beneficial to retain them for a longer period if possible.
3. Should I keep physical or electronic copies of my tax returns?
Both physical and electronic copies are acceptable as long as they are easily accessible and well-organized.
4. Can I shred my supporting documents once I file my tax return?
Supporting documents, such as receipts and invoices, should be kept for at least three years after the date of filing. However, it is advisable to keep them longer if they are relevant to any ongoing transactions or disputes.
5. What if my tax returns contain errors?
If you discover errors in your tax returns, it is essential to file an amended return. Keep both the original and amended copies for the appropriate retention period.
6. Can the IRS audit my business tax returns after three years?
Yes, the IRS has the authority to audit tax returns for up to three years after the filing date. However, this period may be extended to six years if there is substantial underreporting of income.
7. What if I have a partnership or S corporation?
Partnerships and S corporations have specific rules regarding tax returns. Generally, it is advisable to keep these returns for at least six years.
8. Can the IRS request tax returns from previous years?
Yes, the IRS can request tax returns from previous years if they determine that further examination is necessary.
9. What if I lose my tax returns?
In case of lost or destroyed tax returns, you can request a copy from the IRS by filing Form 4506.
In conclusion, it is crucial to retain business tax returns and supporting documents for the appropriate period. By maintaining accurate records, you can ensure compliance with IRS regulations and be prepared for any potential audits or inquiries. If you have any specific concerns or questions regarding the retention of your tax returns, it is advisable to consult with a qualified tax professional.