Here’s what HIVE AI had to say about “What are the tax records retention guidelines for individuals and businesses?”:
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Tax record retention guidelines for individuals and businesses
Core IRS standard for all taxpayers
- Keep “permanent books of account or records” sufficient to establish income, deductions, credits, and other return items, and retain them as long as their contents may become material to any internal revenue law administration. Records must be available for IRS inspection during business hours. 1
How long to keep individual income tax records
- Keep records supporting items on your return at least until the period of limitations expires:
- The later of 3 years from filing the original return or 2 years from the date you paid the tax
- If no return was filed, 2 years from payment
- 7 years for claims related to bad debts or worthless securities
- Keep property basis records until the statute expires for the year you dispose of the property because you need them to compute gain/loss and depreciation recapture 2
- Maintain copies of your signed returns and schedules to help with future filings and any amended returns you may need to submit 3
Business record retention (sole proprietors, partnerships, corporations)
- The same statute-of-limitations rules apply: keep books and records as long as they may be material to tax administration, and at least through the applicable period of limitations for each return year 1
- Employment tax records must be retained for at least 4 years after the tax becomes due or is paid, whichever is later 4
- When closing a business, continue to retain employment tax records for at least 4 years and keep other tax records through the relevant limitation periods 5
Property, equipment, and basis records
- Keep purchase documents, improvements, depreciation schedules, and other basis records for each asset until the period of limitations expires for the return year in which you sell, exchange, or otherwise dispose of the asset 2
Electronic and automated records
- If you maintain machine‑sensible (electronic) records, retain them in a manner that allows IRS to verify computations. Larger taxpayers (assets ≥ $10M) must comply with IRS automated records retention guidance; smaller taxpayers must comply if key data exists only electronically, computations can’t reasonably be verified without a computer, or the IRS notifies you to retain machine‑sensible records 6
Special categories that require longer or explicit retention
- Reportable transactions disclosure (Form 8886): retain all documents material to understanding the tax treatment/structure until the statute of limitations closes on the final year requiring disclosure 7
- Employment tax tip records and other payroll records: must be available for inspection and retained as long as they may become material to tax administration, but not less than the 4‑year payroll standard 8
Practical retention checklist
Individuals
- Keep returns and all support for income, deductions, and credits for at least 3 years after filing or 2 years after payment, whichever is later
- Keep records for bad debt/worthless securities claims 7 years
- Keep property basis and improvement records until after the year of disposition’s statute closes 2 3
Businesses
- Keep books and records through the limitation period for each return year and available for IRS inspection 1
- Retain employment tax records at least 4 years after the tax is due or paid 4
- Preserve electronic accounting records consistent with IRS automated records guidance if you rely on machine‑sensible records for tax computations 6
When in doubt
- If a return year is under examination, involved in a claim, or includes long‑lived assets, keep the records until those matters are fully resolved and the latest applicable statute has expired. IRS guidance reiterates records must be retained as long as they may be material to any internal revenue law 1
Sources
1 – IRS Determination-201752009 📄 Summarize
2 – IRS.gov Tax Topics 📄 Summarize
3 – IRS Newsroom – IR-2025-36 📄 Summarize
4 – IRS.gov – Recordkeeping 📄 Summarize
5 – IRS.gov – Closing a business 📄 Summarize
6 – IRS.gov – Automated records 📄 Summarize
7 – Treasury Regulation 1.6011-4 📄 Summarize
8 – Treasury Regulation 31.6053-4 📄 Summarize
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