Guide
Best Tax Records to Keep and for How Long
Keep the records that support each return for at least three years from filing, because that is the IRS's standard period of limitations. Keep them six years if income may have been understated by more than 25%, seven years for bad-debt or worthless-securities claims, four years for payroll records, five years for FBAR records, and property records until three years after you sell the asset. South Carolina's normal assessment window is also 36 months.
Record retention is set by the period of limitations: the time the IRS or the SCDOR has to assess more tax, or you have to claim a refund. Once that window closes for a given return, most of its supporting records can go, unless an insurer, lender or other law needs them longer. The list below covers the records small business owners and individuals most often ask about, with the period that applies and why.
Income records: 3 years, or 6
Best for: W-2s, 1099s, invoices, deposit records, sales reports
The IRS's standard period of limitations is three years from filing. It becomes six years if you do not report income that should have been reported and it is more than 25% of the gross income shown on the return. Business owners should keep the records that tie deposits to reported sales, such as invoices, receipt books and deposit information.
- 3 years in the ordinary case
- 6 years if more than 25% of gross income was omitted
- Keep bank deposit detail, not just statements
Expense receipts and proof of payment: 3 years
Best for: Receipts, invoices, card statements, canceled checks
The IRS lists canceled checks or other proof of payment, cash register receipts, account and credit card statements, and invoices as the documents that support expenses and purchases. Keep them for the life of the return they support. A monthly bookkeeping routine that attaches the receipt to the transaction makes this far easier than reconstructing it at year end.
- Proof of payment plus what was bought
- Invoices and receipts, not just statements
- File them by month as you go
Property and asset records: until 3 years after you sell
Best for: Closing statements, improvement invoices, depreciation schedules, equipment purchases
The IRS says to keep property records until the period of limitations expires for the year you dispose of the property, because they establish basis, depreciation and the gain or loss on sale. For a rental bought in 2010 and sold in 2030, that means keeping the purchase and improvement records into 2034 or later. Records from a 1031 exchange carry forward into the replacement property.
- Purchase and sales invoices and closing statements
- Every capital improvement
- Depreciation taken each year
Payroll and employment tax records: 4 years
Best for: Employers of any size
The IRS says to keep employment tax records for at least four years after the date the tax becomes due or is paid, whichever is later. That covers payroll registers, Forms 941 and 940, W-2s, W-4s and deposit records. South Carolina withholding returns and the W-2 files uploaded to the SCDOR belong in the same file.
- 4 years from due date or payment, whichever is later
- Include state withholding returns
- Includes W-4s and deposit records
Bad debts and worthless securities: 7 years
Best for: Anyone deducting a loan that went bad or a stock that became worthless
The IRS extends the retention period to seven years if you file a claim for a loss from worthless securities or a bad debt deduction. Keep the loan documents, collection efforts and evidence of when the debt or security became worthless.
- 7 years for these claims
- Evidence of worthlessness and timing matters
- Keep loan papers and collection history
Refund claims: 3 years from filing or 2 from payment
Best for: Anyone filing an amended return to claim money back
If you file a claim for credit or refund after filing the return, keep the records for three years from the date you filed the original return or two years from the date you paid the tax, whichever is later. The same records also show whether the claim itself was timely.
- Later of 3 years from filing or 2 years from payment
- Keep the amended return and its support
- Also shows the claim itself was timely
Foreign account records: 5 years
Best for: Anyone who files an FBAR
FBAR records must generally be kept for five years from the FBAR's due date. That means, for each account, the name on the account, the account number, the institution's name and address, the type of account and the maximum value during the year. Keep the currency rate you used as well.
- 5 years from the FBAR due date
- Maximum value for each account
- Longer than the ordinary 3-year income tax period
South Carolina returns: 36 months, or 72
Best for: South Carolina individuals and businesses
Under S.C. Code Section 12-54-85, SC taxes must generally be assessed within 36 months of the later of the filing date or due date. The window becomes 72 months if there is a 20% understatement of the taxes required on the return, a lower trigger than the IRS's 25% rule. There is no limit for fraud or for returns that were never filed.
- 36 months in the ordinary case
- 72 months for a 20% understatement
- Sales, withholding and income tax records all apply
Records after an IRS change: until the state is settled
Best for: Businesses that have been through an IRS exam
If the IRS changes a business's taxable income, South Carolina requires written notice to the SCDOR within 180 days of the final federal determination, and the SCDOR can assess the related state tax within 180 days after it receives notice, even if the 36-month period has passed. Keep the exam file and the federal determination until the state side is closed too.
- Notify the SCDOR within 180 days
- State window reopens for the federal changes
- Keep the revenue agent's report and closing letter
Unfiled or fraudulent returns: indefinitely
Best for: Anyone with a year that was never filed
The IRS says to keep records indefinitely if you do not file a return or if a fraudulent return is filed, because the period of limitations never starts. If you have unfiled years, the better answer is usually to deal with them, which starts the clock.
- No limitation period without a filed return
- Filing starts the 3-year clock
- Same principle applies in South Carolina
Retention periods at a glance
| Record | Keep for | Counted from |
|---|---|---|
| Records supporting an ordinary return | 3 years | Filing date (early returns count as filed on the due date) |
| Records where more than 25% of gross income was omitted | 6 years | Filing date |
| Bad debt or worthless securities claims | 7 years | Filing date |
| Employment tax records | 4 years | Later of the due date or payment date |
| FBAR records | 5 years | FBAR due date |
| Property and asset basis records | Until the period of limitations ends for the year of sale | Return for the year you dispose of the asset |
| South Carolina returns | 36 months (72 for a 20% understatement) | Later of filing date or due date |
| Unfiled or fraudulent returns | Indefinitely | Never starts |
A simple system that works
- Keep one folder per tax year for records that expire, and a separate permanent folder for property, entity and basis records that do not.
- Keep a copy of every filed return, federal and state, with its supporting schedules. They help with future returns and amended returns.
- Store receipts with the transaction in your bookkeeping software as you go, rather than in a year-end shoebox.
- Each spring, after the new return is filed, review the oldest year and destroy what has passed its period, securely.
Haigler CPA Group's bookkeeping service keeps records organized month by month, which is also what makes a notice or exam manageable. Before a first meeting, our documents-to-bring checklist shows what to gather. If you are comparing firms, see our list of small business accountants in Charleston.
Sources
The information on this site is general in nature and is not tax, legal, or accounting advice for your situation. Tax law changes and the right answer depends on facts we would need to review with you. Please speak with a qualified professional before acting on anything you read here.
Questions people ask about this
How long should I keep tax returns?
The supporting records need to be kept at least three years from filing in the ordinary case, and longer in the situations the IRS lists. The IRS also recommends keeping copies of filed returns, because they help in preparing future returns and in making computations if you file an amended return.
How long should a business keep payroll records?
At least four years after the tax becomes due or is paid, whichever is later, according to the IRS.
How long can South Carolina audit my return?
Generally 36 months from the later of the filing date or due date. It extends to 72 months for a 20% understatement and has no limit for fraud or unfiled returns. Federal changes can also reopen the state window.
When can I throw away records for a house or rental property?
Not until the period of limitations has expired for the year you sell it. Purchase, improvement and depreciation records are what establish your basis and gain.
What records do I need for foreign accounts?
For each account, the IRS lists the name on the account, the account number, the name and address of the foreign bank, the type of account and the maximum value during the year. Bank statements or copies of filed FBARs showing that information are acceptable. Keep them five years from the FBAR due date.
Keep reading
- Biggest Tax Mistakes Small Business Owners MakeEleven costly tax mistakes small business owners make in 2026, from missed estimates and the new $2,000 1099 threshold to payroll deposits and SC depreciation.
- Best Bookkeeping Apps for Small BusinessesSeven bookkeeping and receipt apps small businesses use, including QuickBooks Online, Xero, FreshBooks, Wave, Zoho Books, Dext and Expensify.
- Best Small Business Accountants in Charleston (2026)Haigler CPA Group's 2026 list of Charleston-area CPA firms for small businesses: tax, bookkeeping and planning, with what each firm's own site says.
- Bookkeeping ServicesClean books, reconciled monthly, ready for tax time.
- Documents to BringA checklist for the first conversation, so the second one is about answers.
- A Monthly Bookkeeping Checklist for Small BusinessesBookkeeping goes wrong slowly. A month that is never closed becomes a quarter nobody trusts, and then a filing season spent reconstructing a year from bank statements. The routine below prevents that.
- All Charleston tax & accounting guidesEvery list, choosing a CPA and the tax reference lists.
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