How long to keep sales records: 6 IRS periods

Keep sales records until the period of limitations expires for the return they support; the IRS periods below help you check the relevant dates.

Key takeaways

Match each record to the return it supports.
Check the filing, payment, and due dates before setting a discard date.
Keep sales reports and payment records together.
Test your backups and ask your accountant before destroying uncertain records.

Why there is no single number

In practice the answer depends on which question might come up later and which record would answer it. The federal tax agency, the Internal Revenue Service (IRS), sets out its record periods on one topic page, and each period works like a deadline. Each period is measured from a date or event that depends on the question and covers a different kind of question.

This post walks through six of those deadline periods in plain words, then shows how to turn them into a simple storage routine for the till, the cash office, and the back room. It is general information, not tax advice. A certified public accountant or tax professional who knows your business can tell you how these periods apply to you, so ask before you discard anything that might matter.

Deadline 1: three years from when you filed the return

For assessment of tax you owe, the period is generally 3 years from the date you filed the return. IRS Topic No. 305

For a shop, this period covers the daily sales totals, end-of-day reports, and paperwork behind each return. Keep the return and its supporting records together, and keep them easy to find. A folder labeled by tax year is easier to search than a box labeled by the month something happened, since a question about a return usually starts with the return.

Pay attention to the word generally. Three years is the usual length, not a promise that every record can go after three years. The next deadlines show where the period can stretch, and the final one explains how to decide when a record is free to discard.

Deadline 2: six years when income is left off the return

Deadline two applies when income that should have been reported was not reported. If you don't report income that you should have reported, and it's more than 25% of the gross income shown on the return, the time to assess tax is 6 years from the date you filed the return. The same six-year period applies when the income is attributable to foreign financial assets and is more than $5,000. IRS Topic No. 305

The first test compares the unreported income with the gross income on the return. A large unrecorded sale, or a run of cash sales that never made it into the books, is exactly the kind of gap this test looks at. Your sales records are the evidence for whether the return shows the full picture. If your till totals never matched your deposits, talk with your accountant before deciding how long to keep those records.

The second test concerns income attributable to foreign financial assets. It is a different situation from ordinary sales records. A tax professional should check it if it ever applies to your business, rather than guessing from a rule of thumb.

Deadline 3: the later of three years or two years after payment

This deadline is about money coming back to you. For filing a claim for credit or refund, generally the period to make the claim is 3 years from the date you filed the original return or 2 years from the date the tax was paid, whichever is later. IRS Topic No. 305

Work it out in two steps. Take the date you filed the original return and count three years forward. Then take the date the tax was paid and count two years forward. The claim period ends on the later of the two dates. Because both dates can fall in different years, do not assume one of them is the answer without checking.

For a shop, this means your records of tax payments matter as much as your sales records. Keep payment confirmations, deposit slips, and bank statements that show when money left your account, together with the sales records that explain how the amount was built. A refund claim is easier to support when both sets are on hand.

Deadline 4: two years when no return was filed

Sometimes a return is never filed. If no return was filed, the period to file a claim is 2 years from the date the tax was paid. IRS Topic No. 305

This is the shortest period on the list, and it is easy to misread. A missing return does not mean the records behind it can go. If you have not filed a return for a year, pull the sales records, cash counts, and payment records together before you do anything else, and get professional advice on what needs to be filed.

A calm, organized approach works best here. Start with the oldest year, gather what you have, and mark any gaps on a list rather than filling them with guesses.

Deadline 5: seven years for bad debts and worthless securities

Some shops carry customer tabs, store credit accounts, or invoices owed by business customers. When one of those debts goes bad, the books change. For filing a claim for credit or refund due to an overpayment resulting from a bad debt deduction or a loss from worthless securities, the time to make the claim is 7 years from the date the return was due. IRS Topic No. 305

Two details matter. The count starts from the date the return was due, not the date you actually filed it. And the period applies to claims of this kind, not to every claim. In plain words, a bad debt is money a customer owes your business that you have written off as uncollectible. A worthless securities loss applies if your business held stocks or bonds that became worthless.

Keep the customer account history, the write-off note, and the invoices that show the amount owed. A tab that was written off in a busy week is easy to forget, and the records that show it are the first thing you will need if the question comes up.

Deadline 6: until the period of limitations ends

The last deadline ties the others together. It generally lasts until the period of limitations expires for that return. IRS Topic No. 305

The period of limitations depends on the question involved. The assessment periods concern time for the IRS to assess tax; deadlines 3 to 5 concern time for the taxpayer to file a credit or refund claim. A record matters as long as it could help answer a question about a return, and the rule asks you to keep it until the window for that return has closed.

This is why the same sales report can need to stay on file longer than you expect. It supports whichever return it fed into, and that return may have a different end date from the one you had in mind for that month. When in doubt, keep the record and check it against the return it supports before you discard it.

Illustrative example at a small shop

Picture a small gift shop. The owner files the return in March. While clearing the back room a year later, a clerk finds a box of daily sales reports from that year, along with deposit slips and a stack of store credit tabs that were written off. Before anyone throws anything out, the owner works through the six deadlines.

Counting three years from the March filing gives the general assessment end date; the reports are only a year old, so they stay. The written-off tabs also need a separate check against the bad debt claim period. IRS Topic No. 305

The owner marks the box with the tax year, the return it supports, and the date the longest window closes, and gives the list to the accountant to confirm.

Turning the six periods into a routine

Start with a written retention schedule. It can fit on one page. List the six periods in your own words, then list the record types your shop keeps: daily sales reports, end-of-day cash counts, deposit slips, refund and void logs, supplier invoices, customer account records, and bank statements. For each record type, write down which return it supports and the point at which you may discard it. Use the related guide to shop record retention when organizing that list.

File by tax year rather than by the month a record was made. Label each box or folder with the tax year and the return it supports, and keep a short index of what is inside. Paper and digital copies should match. If you scan old paper, note the date of scanning and keep the paper until you are sure the scan is complete and readable.

Back up your point-of-sale data to a second location, and test it. Export a past day's report, open it, and confirm the totals are there. A backup that cannot be opened is no help during a question about an old year. Before you change or replace your system, export the historical data first and keep it with your schedule.

Who does what in the shop

Till staff are the first people who touch sales records, so their habits matter most. Close every shift with the same report, in the same order. Do not throw out printed tapes, void slips, or drawer count sheets; hand them to the manager at the end of the shift. If something does not match, write a short note with the time, the amount, and what you think happened. The guide to recording cash totals before closing can help with this routine.

Managers check the paperwork before it goes into storage. Confirm that end-of-day reports, refunds, voids, and deposits agree with one another. Set a monthly routine for filing and for checking that nothing is missing. When totals move sharply from one month to the next, write down the reason so the explanation is on file with the numbers.

Owners own the retention schedule. Review it once a year with your accountant, decide who may approve destroying records, and make sure the approval is written down. Owners also need to keep an eye on the systems. If a manager leaves, someone else should know where the files and backups are.

Common mistakes to avoid

A few errors are easy to make, so watch for these:

Assigning a discard date without checking which of the cited IRS periods applies.
Keeping the return but discarding the sales slips, cash counts, and deposit slips that support it.
Counting from the wrong date instead of checking the filing, payment, and due dates separately.
Storing records only in a point-of-sale system you may replace later without exporting the data first.
Shredding an old box because it looks out of date, without checking which return it supports.

Start today

Pick one folder and label it with the tax year and the return it supports before checking its discard date.

Questions readers ask

Can I throw out old till tapes after three years? Not automatically: check which return they support and which period applies before discarding them.

Does a digital copy count? Ask your accountant whether a digital copy is enough for each record type on your schedule. Do not assume that a scan is accepted just because it looks complete.

What if I cannot tell which return a record supports? Keep it until you know. A record that is not tied to a return is hard to justify discarding, so label it as unsorted and ask your accountant to help place it.

Do all records share one schedule? No, the schedule should list each record type separately. That makes it easier to check the relevant dates without treating every file alike.

Who makes the final call? The owner decides, with the accountant's input, and the decision should be written down with the date it was made.

Keeping records safe and findable

Paper needs a dry, cool place away from pests and from anything that could leak onto it. Store it off the floor and away from sinks and any pipe that might drip. Keep the storage room locked, and record who has keys. A folder that is lost to water damage cannot answer a question, however carefully it was filed.

Digital files need the same care. Use a folder structure that mirrors your paper filing, with the tax year in the name. Keep at least one copy somewhere other than the shop, such as a separate drive or a secure cloud account, and check the copy every few months. Write down who holds the login for each account, so the files can be reached if a key person is unavailable.

Check your access list each time someone joins or leaves the team. A former employee should not keep the ability to open or delete old records, and a new manager should know where the schedule sits.