J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

How Long You Should Maintain Records

Your books and records must be available at all times for inspection by the IRS. You should keep these books and records at least until the time when the IRS’s ability to question your deductions runs out. This time is called the statute of limitations. In general, the statute of limitations is either 3 years after the due date of your return or 2 years after the date the tax was paid—whichever is later. Some records must be kept even longer. You need to keep records to support the basis in property owned by the business. You also need to keep records for depreciation and carryovers, as discussed earlier.

Tax Returns

Keep copies of tax returns to help you prepare future returns, as well as to help you if your return is questioned by the IRS. While you can obtain old returns from the IRS, this entails unnecessary time and expense. Although you may only need information on an old return for 3 additional years, it is a good idea to keep old tax returns indefinitely. If the IRS claims you never filed a return it has an unlimited number of years in which to audit you. But if you have your old return along with proof that you filed it (for example, a certified receipt), the IRS only has 3 years, in most cases, to start an audit.

Keep a record of the basis of property used in your business for as long as you own the property, plus the statute of limitations on filing the return for the year in which property is sold or otherwise disposed of. For example, ...