Producing and Retaining
Business Records

The federal tax system expects businesses to maintain records that substantiate income, expenses, credits, and other items reported on their returns.

Under Internal Revenue Code §6001 and Treasury Regulation §1.6001-1, required books and records must remain available for inspection and be retained as long as their contents may become material to the administration of federal tax law.

What Records Should Be Kept?

• Sales invoices, receipts, and revenue reports
• Vendor bills, receipts, and proof of payment
• Bank and credit card statements and reconciliations
• Payroll, employee, and employment tax records
• Forms 1099, W-9, and contractor payment records
• Asset purchase, depreciation, and disposition records
• Loan, lease, contract, and related-party documents
• Filed returns and supporting schedules

Principal Federal Retention Periods

Property and Asset Records

Records establishing cost, basis, depreciation, and improvements should be kept until the limitation period expires for the year in which the property is disposed of. This includes real property, vehicles, equipment, and other depreciable assets.

What Does “Available for Inspection” Mean?

Records should be readable, connected to the underlying transaction, and retrievable within a reasonable time. Digital systems need consistent file naming, year-and-account organization, access controls, and reliable backups. Assuming a bank will always provide old statements is not a complete retention policy.

Even after a minimum period expires, do not destroy records relevant to a pending examination, dispute, lawsuit, insurance claim, or contractual obligation.

Build a Written Retention Policy

Federal periods are a starting point. State law, employment rules, professional licensing, contracts, and litigation holds may require longer retention. A written schedule should identify each record category, owner, retention period, secure destruction method, and applicable exceptions.

This content is for general informational purposes and is not tax or legal advice. Federal, state, industry, contractual, and litigation-hold rules may require different periods. A business-specific retention policy should be evaluated separately.