How Long Should I Save My Tax Records?
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 2021 tax return on March 1, 2022 save your records until at least March 1, 2025.
If you get a six-month extension to file your taxes (until October 15th) you must save your records until October 15, 2025.
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: home improvements (deck, remodeling, new furnace, new roof, wood floors, etc.) thirty-nine years; and the 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 deck in 2021 you should save your receipt for thirty-nine years, plus three years, or until 2063. 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 2021 the IRS could audit you for 2020, 2019, and 2018. 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 2017 and earlier (but remember the exceptions)!
Final note: Save copies of your tax returns for as long as you live - plus three years!
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.communitytax.com/how-long-keep-business-tax-records/
For more information, see my book Family Child Care Record Keeping Guide.
