Which business records to keep, and for how long

Every spring someone asks whether they can shred the boxes in the basement. Usually some of them, yes. The answer depends on what the papers prove and how long a tax agency can still ask about the year they belong to.

The general rule

The IRS can generally examine a return for three years after you file it, or after the due date if you filed early. Keep the records that support a return at least that long. Illinois uses a similar three-year window for most income tax assessments.

Several situations stretch the window:

• Six years if a return left out income of more than 25% of the gross income it showed.
• Seven years for a return that claims a loss from a bad debt or a worthless security.
• No limit if a return was never filed or was fraudulent.

Because of the six-year rule, many firms, including ours, suggest keeping most business records for seven years.

Record by record

Record	Keep for
Filed tax returns, federal and Illinois	Permanently
Bank and credit card statements	7 years
Receipts, bills and invoices supporting deductions	7 years
Sales records and invoices you issued	7 years
Payroll records: timecards, pay registers, Forms W-4 and IL-W-4, payroll returns	At least 4 years after the tax was due or paid; we suggest 7
Forms I-9	3 years after hire or 1 year after employment ends, whichever is later
Records for equipment, vehicles and buildings: purchase, improvements, depreciation	Until 7 years after you sell or dispose of the asset
Loan documents	Until 7 years after the loan is paid off
Formation papers, operating agreement, S corporation election, EIN letter	Permanently
Sales tax returns and supporting records	7 years

The asset row trips people up most. The depreciation on a truck bought in 2019 matters to the tax on the sale in 2027, so its purchase papers are kept until seven years after that sale.

Paper or digital

The IRS accepts digital records if they are legible, complete and you can produce them when asked. Scanning and shredding paper is fine. A few practical rules:

• Use one folder per tax year, with the same subfolders each year: bank, cards, income, expenses, payroll, assets, returns.
• Name files with the date first: “2026-03 business checking statement” sorts itself.
• Keep two copies. A cloud drive and an external drive, or your bookkeeping program plus a cloud drive.
• Save the year’s return as a PDF in that year’s folder the day it is filed.

What you can shred this year

If your 2018 and earlier returns had no unreported income problems and claimed no bad-debt or worthless-security losses, the supporting receipts and statements for those years can usually go, except asset records still in use and anything tied to an open question with a tax agency. Keep the returns themselves.

Shred paper with your tax ID numbers, bank account numbers or employee details. Local banks and community groups often host free shredding days in spring and fall; check their calendars before you load the car.

If you are not sure

Bring the box to the office. Lucia can tell you in a few minutes what goes and what stays.