How to Keep Books and Records for Tax Audits
A Practical Guide to Record Retention
I. What Records Must Be Kept?
- Income: Bank statements, POS/cash register records, rental receipts, 1099/W-2 forms.
- Expenses: Invoices, receipts, copies of checks, credit card statements, payroll records.
- Assets & Liabilities: Property contracts, loan documents, equipment purchase contracts, depreciation schedules.
- Tax Documents: Copies of filed tax returns, IRS notices, business licenses, and state tax filings.
II. How Long Should Records Be Kept?
- General Rule: At least 3 years.
- Underreporting Income (>25%): IRS may audit up to 6 years back.
- No Filing or Fraud: No statute of limitations; records can be audited indefinitely.
- Asset Records: Keep until at least 3 years after the asset is sold.
👉 Recommendation: Keep all records for at least 7 years; asset-related records should be kept long-term.
Reference Table: Record Retention Periods
Type of Record | Retention Period | Notes |
Income records (bank statements, receipts, 1099/W-2) | At least 3–7 years | IRS may audit up to 6 years |
Expense records (invoices, payroll) | At least 3–7 years | Recommended 7 years for audit safety |
Tax returns & IRS notices | At least 7 years | Critical records, keep long-term |
Property/equipment contracts & depreciation records | At least 3 years after sale | Needed for capital gains reporting |
Business licenses, state filings | At least 7 years | Often required by state audits |
III. Paper vs. Digital Records
- Paper: Organize by category (income, expenses, payroll, assets, taxes) and store securely.
- Digital: Scan to PDF, archive by year/category, store in cloud (Google Drive, Dropbox).
- Accounting Software: QuickBooks, Xero, etc. can generate reports and store records automatically.
IV. Common Questions from Las Vegas Resident Businesses
Q1: Is keeping only bank statements enough?
👉 No. You must also keep original invoices and receipts.
Q2: Can I throw away records once taxes are filed?
👉 Not recommended. IRS may request documents from 3–7 years back.
Q3: Can I store receipts as photos in WeChat?
👉 Acceptable as a backup, but best to also save them to a computer or cloud drive, organized by year.
V. Summary
- Scope: Income, expenses, assets, and tax-related documents.
- Retention Period: At least 3–7 years; asset records should be kept long-term.
- Method: Keep both paper and electronic backups.
- Tools: Accounting software + cloud storage.
Contact Us
📍 Zhizhong Zhou CPA — We provide tax and accounting services in both English and Chinese to better serve the diverse community in Las Vegas
📞 Phone: 702-292-1650
📧 Email: alexzhoucpa@outlook.com
🏢 Address: 6376 Spring Mountain Rd Ste 5, Las Vegas, NV 89146
📱 WeChat: alexzhoucpa
Disclaimer
This article is for general informational purposes only and does not constitute specific tax, accounting, or legal advice. Laws and regulations may change over time and vary depending on individual circumstances. For guidance tailored to your situation, please consult a Certified Public Accountant (CPA) or qualified tax advisor. Zhizhong Zhou CPA assumes no responsibility for any direct or indirect consequences resulting from reliance on this content.
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