The simple rule is seven years for most things and permanently for a few key documents. The IRS can audit returns up to three years back under normal circumstances, six years if income was significantly underreported, and seven years if you claimed a loss from bad debt or worthless securities. Keeping records for seven years covers nearly every scenario.

Tax returns should be kept permanently. They’re small files and you never know when you’ll need to reference them for a loan application, insurance claim, or comparison to current performance. The supporting documents for those returns like receipts, bank statements, and expense reports can follow the seven-year rule.

Bank and credit card statements should be kept for seven years. These are your backup if receipts go missing and proof that transactions actually occurred. Most banks provide digital access to old statements, but don’t assume they’ll keep them forever. Download annual archives and store them yourself.

Receipts for tax deductions follow the seven-year rule. If you claimed a deduction, you need proof it was legitimate. This includes receipts for materials, equipment, vehicle expenses, and anything else you wrote off. Digital copies are fine as long as they’re legible and organized. The IRS accepts electronic records.

Payroll records have specific requirements. Keep records of wages, tax withholdings, and employment dates for at least four years after the tax becomes due. Most accountants recommend keeping payroll records for seven years to align with everything else. Worker classification documentation matters especially if you use subcontractors. Full-service bookkeeping should include organizing these records so they’re accessible when needed.

Employee personnel files should be kept for at least four years after the employee leaves. If there’s any possibility of a dispute or legal claim, keep them longer. Same goes for independent contractor agreements and 1099 documentation.

Contracts and legal agreements should be kept for the life of the agreement plus seven years. Construction contracts, lease agreements, vendor contracts, and customer agreements all fall into this category. If there’s ever a dispute about what was agreed to, you need the original document.

Property and asset records require special attention. Keep records for any asset you’re depreciating until you dispose of it plus seven years. You need to document original purchase price, improvements, and depreciation taken. When you sell equipment or a vehicle, the gain or loss calculation depends on records you might have created years earlier. This is especially important for contractors and bookkeepers in American Fork often see issues arise when business owners can’t document the basis of assets they’re selling.

Corporate documents should be kept permanently. Articles of incorporation, bylaws, meeting minutes, stock certificates, and ownership changes never expire in relevance. These prove your business exists and who owns it.

Insurance policies should be kept permanently even after they expire. Claims can arise years after an incident occurred, and you need to prove you had coverage at that time.

For Utah businesses, state record requirements generally align with federal guidelines. The Utah State Tax Commission can audit state returns up to three years back under normal circumstances, similar to the IRS timeline.

Digital storage makes this manageable. Scan paper documents, organize them by year and category, and back them up in multiple locations. Cloud storage with automatic backup is inexpensive insurance against losing records to fire, flood, or hard drive failure. The cost of storage is nothing compared to the cost of reconstructing records or losing an audit because you couldn’t prove a deduction.

When in doubt, keep it. Storage is cheap and the downside of throwing something away too early is far worse than the minor inconvenience of keeping files you might never need.