It’s a question I hear often in my tax workshops for family child care providers.
The simple answer is: three years after filing your tax return. This means if you file your 2015 tax return on March 1, 2016 save your records until at least March 1, 2019.
If you get a six-month extension to file your 2015 taxes (until October 17, 2016) you must save your records until October 17, 2019.
Save your receipts for business purchases, credit and debit card monthly statements, bank statements, bank deposit slips, calendar notations (showing hours worked or business trips), child attendance records, mileage records, records indicating how many hours you used your home for business, photographs, and so on.
There are a few exceptions to this general rule. Your state may require you to save your tax records for four years. If you hire employees you should save your payroll records for four years.
If you are depreciating items for your business you should save receipts for these purchases for as long as you are depreciating them, plus three years. These items include: office equipment (computers, printers, etc.) five years; personal property (furniture, appliances, children’s equipment, carpeting, etc.) seven years; land improvements (fence, driveway, patio, septic tank, etc.) fifteen years; home improvements (deck, remodeling, new furnace, new roof, wood floors, etc.) thirty-nine years; home thirty-nine years. For details on how to depreciate, see my Family Child Care Tax Workbook and Organizer.
For example, if you bought a new washing machine in 2015 you should save your receipt for seven years, plus three years, or until 2025. Yes, it’s that long!
The reason you need to save your records for this long is because the IRS can audit you back three years. So, as of December 2015 the IRS could audit you for 2014, 2013, and 2012. They can audit back further than three years if you didn’t file a tax return, under reported your income by more than 25% or committed fraud. So, throw away your receipts and other records for 2006 and earlier (but remember the exceptions)!
Final note: Save copies of your tax returns for as long as you live – plus three years!
If you have questions about this, please email me at firstname.lastname@example.org
Tom Copeland – www.tomcopelandblog.com
Image credit: mcmillanconsults.net
For more information, see my book Family Child Care Record Keeping Guide.