Wendy Burgess, Manager

Guidelines for Tax Record Retention

Wait! Before You Shred Tax Records…

Your file cabinet may have little room left for past tax records. Before you purge past data, BKD, LLP offers a few guidelines to help you get organized without eliminating critical information.

Federal income tax regulations require you to keep records as long as the contents may be material to the administration of the tax law. The retention periods shown in the federal guidelines chart on this page apply to records needed to substantiate your federal income tax return. They are based on the federal statute of limitations, which is normally three years. What does this mean? The Internal Revenue Service (IRS) can audit your tax return up to three years from the due date or the date of filing, whichever is later.

Some state statutes exceed the federal statute or have laws or regulations requiring taxpayers to maintain records beyond the state’s statute of limitations. For guidelines, see state statute chart on this page.

How do you make a decision when state and federal records retention guidelines differ? Maintain your tax records based on the longer of the federal and state requirements. To determine your record-retention schedule, consider keeping indefinitely records that cannot be recreated by any other office, institution or governmental unit.

Special Rules for Computer Records

Record-retention periods are generally the same for machine-sensible records as their hard-copy counterparts. Machine-sensible records include magnetic tapes, punched cards and computer disks.

If you or your business has more than $10 million in assets, then the IRS requires your machine-sensible records to be in a retrievable format. Therefore, you must retain the following documentation for data files:

  • Record formats
  • System and program flowcharts
  • Label descriptions
  • Source program listings of programs used to create the files retained
  • Detailed charts of accounts
  • Evidence that periodic tests are performed on the retained records
  • Evidence that the retained records reconcile to the taxpayer’s books and the tax return

If you or your business has less than $10 million in assets, but you maintain accounting records on a computer, then the IRS requires you to conform to the above standards if your books and records are only available in machine-sensible format, machine-sensible records were used for complex computations or you are notified by the IRS your machine-sensible records must be maintained.

Federal Guidelines for Paper Records

Three Years*
 Auto mileage logs (three years or life of vehicle)
Bank deposit slips
Cancelled checks
Daily sales records
Entertainment records
Expense reports
Paid vendor invoices
Written acknowledgment from charity for contributions of $250 or more
*From date of filing return or due
 date of return, whichever is later

Six Years
 Bank statements
Contracts (after expiration)

Permanent
 Annual financial statements
Corporate stock records
General ledger & journals
Real estate records
Tax returns
Copy C of Form W-2
LIFO inventory record

Other
 Depreciation schedules (life of asset, plus three years)
Meeting minutes (life of company)
IRA contribution and distribution records (three years after final distribution)
Statute of Limitations for BKD States
StateStatuteRegulation Retention
Arkansas3 yearsArkansas regulations require records be kept for six years
Colorado4 yearsColorado regulations require records be kept for four years
Illinois3 yearsIllinois regulations do not specify minimum record-retention periods
Indiana3 yearsIndiana regulations require records be kept three years
Kansas3 yearsKansas regulations require records be kept three years
Kentucky4 yearsKentucky regulations require records of tax payments be kept for seven years
Missouri3 yearsMissouri regulations require records be kept for four years
Nebraska3 yearsNebraska regulations do not specify minimum record-retention periods
Ohio4 yearsOhio regulations require records be kept four years
Oklahoma3 yearsOklahoma regulations do not specify minimum record-retention periods
Texas4 yearsTexas regulations require records be kept four years

For More Information

Contact your BKD advisor or:
Lisa G. Workman
National Tax Director
417.831.7283