Tax Audits
Here is a clear, practical, accountant-level guide on exactly what records to keep for tax audits and how long to keep them suitable for small businesses and freelancers in most countries (U.S. rules included, but this works globally).
| Category | Records to Keep | Retention Period | Notes |
|---|---|---|---|
| Income | Sales invoices, bank deposits, POS reports, marketplace payouts (Shopify, Amazon, Fiverr), contracts, 1099s or local tax slips | 7 years recommended | Keep proof of all reported income |
| Expenses | Receipts, supplier invoices, bills, utilities, travel logs, meal receipts with details, software invoices, proof of payment | 7 years | Must show business purpose; undocumented expenses may be disallowed |
| Bank & Credit Card Statements | Business bank statements, credit card statements, loan statements, merchant processor reports (PayPal, Stripe, Square) | 7 years | Match statements with receipts and expenses |
| Payroll | Timesheets, pay stubs, payroll registers, tax withholdings, W-2/W-3/941/940 (U.S.), employment contracts | 7+ years | Some countries require up to 10 years |
| Assets & Depreciation | Purchase invoices, financing/lease agreements, depreciation schedules, improvements/repairs, closing documents | Until sold + 7 years | Supports cost basis for depreciation & gain/loss |
| Tax Returns | Filed returns, supporting schedules, audit letters, tax payment confirmations, accountant working papers | 7 years minimum | Never discard old returns |
| Entity Formation & Legal Documents | LLC/corporation formation papers, operating agreements/bylaws, stock certificates, annual minutes, EIN confirmation | Keep permanently | Proves ownership and structure |
| Digital vs. Paper | Scans, PDFs, photos, cloud storage (Dropbox, Google Drive, QuickBooks) | As long as accessible | Must be clear, unaltered, and retrievable |
| Common Audit Requests | Bank statements + receipts, mileage logs, asset purchase records, payment processor reports, loan agreements & proof of repayment | Varies | Keep organized to simplify audits |