The Key to Record Management
I hope you are actively caring for your well-being amidst the noise and turmoil of our world, near and far.
Before I get into the article, here are a few reminders related to IRS individual refunds for 2025:
- Refunds are generally issued in 21 days or less after a return is e-filed and accepted.
- Some returns with refunds have a higher fraud rate. The PATH Act requires the IRS to hold these refunds for taxpayers who claim such an Earned Income Credit (EITC) or Additional Child Tax Credit (ACTC). The IRS expects EITC and ACTC refunds to be available the final week of February.
Let’s Move Along to the Article —
Rich Lauwers, a system management strategist, says it best — “Records management knows what you have, where you have it, and how long you have to keep it.”
A common question clients ask is, how long do I need to keep tax-related documents? I aim to address this question and other document retention in this article.
Key Takeaways:
- How long am I supposed to keep tax records as an individual?
- What types of documents a business ought to keep?
- What life situations/circumstances warrant keeping records — forever?
Individuals’ Records:
The table below reflects the period of retention for certain IRS Situations:
Situation:
1. Tax return filed; none of the below circumstances apply
Standard Period of Limitations for the IRS Actions: 3 Years.
2. The taxpayer does not report significant income on the return.
Standard Period of Limitations for the IRS Actions: 6 Years.
3. The taxpayer files a fraudulent return.
Standard Period of Limitations for the IRS Actions: Unlimited.
4. The taxpayer does not file a return.
Standard Period of Limitations for the IRS Actions: Unlimited.
5. The taxpayer claims a loss from worthless securities or bad debt.
Standard Period of Limitations for the IRS Actions: 7 Years.
Special Rule: If you own property of any kind, special rules apply. You can find a more detailed list on our website: https://mpagroupllc.com/resources/tax-retention-guide
Businesses and Recordkeeping:
Every business, without exception, ought to maintain a record-keeping system. Beyond mere compliance, effective record-keeping provides a clear understanding of income, expenses, assets, and liabilities. Proper bookkeeping lays the groundwork for informed decision-making and future success.
For most small businesses, the business checking account and credit cards are the primary sources for entries in their business books. These records should summarize all business transactions. For a comprehensive list of required business records, refer to this IRS webpage
Forever Documents (just to list a few):
•Birth Certificates — Adoption Papers — Custody Agreement
•Marriage Licenses — Divorce papers
•Wills — Death Certificates
•Records of Paid Mortgages
•Passports — Social Security Card
•Legal Records
•Disability or military status or discharge papers and any governmental employment.
Before I close, while hiring a professional may be more expensive, the peace of mind it provides is invaluable. Disorganized records can lead to unnecessary stress and anxiety, so it’s worth investing in proper record-keeping. Partner with us for bookkeeping support.
In closing, it may be wise to remember that as humans, we are limited in our capacity. Let’s resolve to let go of things, behaviors, and habits that have exhausted their useful life; and venture to travel a little lighter and a little freer. In scripture, our Creator invites us to “learn the unforced rhythms of grace,” which allows us “to live freely and lightly.”
Thank you for reading.
With gratitude,
Nadine Riley, CPA
Founder, Masterpiece Accounting Group
Phone: (212) 966-9301
Email: info@mpagroupllc.com
The Masterpiece Accounting Group web, blogs, and articles are not rendering legal, accounting, or other professional advice. Tax strategies and techniques depend on your specific facts and circumstances. You should implement the information in this newsletter only with the advice of your tax and legal advisors.