The IRS page states five distinct retention periods for shop files, starting with three years in the ordinary case. Internal Revenue Service
Key takeaways
- Keep ordinary shop records for three years unless specific exceptions apply, as stated by the Internal Revenue Service.
- Retain employment tax records for at least four years after the date the tax becomes due or is paid, whichever is later, according to the Internal Revenue Service.
- Extend retention to six years if unreported income exceeds 25% of the gross income shown on your return, according to the Internal Revenue Service.
Which five retention periods the IRS page states for shop files
When you prepare to discard old sales and payroll papers, the Internal Revenue Service outlines specific timeframes that depend on the nature of your tax filings and claims. The standard period is three years if none of the special situations apply to your business. This baseline applies when you do not file a claim for credit or refund after filing your return, do not claim a loss from worthless securities or bad debt, and do not omit more than 25 percent of your gross income.
If you file a claim for credit or refund after you file your return, the retention period extends to three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.
A separate seven-year period applies if you file a claim for a loss from worthless securities or bad debt deduction. In this scenario, the documentation must be kept for seven years to substantiate the specific financial loss claimed on your return.
The period becomes six years if you do not report income that you should report, and it is more than 25 percent of the gross income shown on your return. This condition triggers a longer review window specifically for significant omissions in reported revenue.
Finally, employment tax records require a different retention schedule. You must keep these records for at least four years after the date that the tax becomes due or is paid, whichever is later. This four-year rule applies specifically to employment tax documents and does not cover ordinary sales invoices or general business records.
Retention periods by publisher
The table below lists the retention periods stated by each publisher for specific record types. Use it to match a shop file to the period its source names before you discard the paper.
| Publisher | Record Type | Retention Period | Condition or Scope |
|---|---|---|---|
| Internal Revenue Service | General records | 3 years | Situations (4), (5), and (6) do not apply |
| Internal Revenue Service | Refund claim records | 3 years from filing or 2 years from payment | Whichever is later, if you file a claim for credit or refund |
| Internal Revenue Service | Bad debt or worthless securities records | 7 years | You file a claim for a loss from worthless securities or bad debt deduction |
| Internal Revenue Service | Omitted income records | 6 years | Unreported income is more than 25% of gross income shown on your return |
| Internal Revenue Service | Employment tax records | At least 4 years | After the date that the tax becomes due or is paid, whichever is later |
| Legal Information Institute | Basic wage records | At least 3 years | Each employer shall preserve these records |
| Legal Information Institute | Supplementary basic records | At least 2 years | Each employer required to maintain records under this part |
| U.S. Small Business Administration | Common business records | Three to seven years | Common guidelines advise keeping records for anywhere from three to seven years |
Check the condition column before applying a period to a specific invoice or payroll sheet. The IRS rows apply to tax returns and claims, while the Legal Information Institute rows apply to wage records. The U.S. Small Business Administration row gives common guidelines for a range of business records.
The five IRS periods, including the 25 percent test
The Internal Revenue Service page "How long should I keep records?" lists distinct retention windows for shop files based on specific filing scenarios. You must match each file to the correct period rather than applying a single rule to all documents. The ordinary case sets the baseline, while special claims and tax situations extend that timeline.
Three years for the ordinary case. According to Internal Revenue Service, you keep records for three years if the special situations described in points (4), (5), and (6) of their list do not apply to you. This covers standard sales invoices when no amended returns or loss claims are involved. For sales tax paperwork in the same files, see Sales tax filing deadlines for shops in 4 states. If your shop files fall into this general category, the three-year mark is the minimum retention point stated by the source.
Refund claim period. If you file a claim for credit or refund after filing your original return, the retention period changes. The source states to keep records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later. This rule applies specifically when you have submitted a post-filing claim. You should check your filing dates against the payment dates to determine which starting point extends the deadline further.
Seven years for bad debt or worthless securities. A longer period applies when you file a claim for a loss from worthless securities or a bad debt deduction. The source specifies keeping these records for seven years. This does not apply to every unpaid invoice or customer debt; it is limited to cases where you formally file a claim for such a loss. If your shop has not filed such a claim, this seven-year period does not govern your standard sales records.
Six years when omitted income exceeds 25 percent. The source requires six years of record retention if you do not report income that you should report, and that unreported amount is more than 25% of the gross income shown on your return. This condition is specific to significant underreporting. It is not a general rule for all business files. You should review whether any past returns had unreported income exceeding this threshold before discarding older documents.
Four years for employment tax. Employment tax records follow a separate timeline. The source directs you to keep these records for at least four years after the date that the tax becomes due or is paid, whichever is later. This period applies specifically to employment tax documentation, not to ordinary sales invoices or other business paperwork. Ensure your payroll files remain accessible for this duration relative to the tax due date.
Wage-record periods of 3 years and 2 years
The wage-record rules operate independently from the IRS tax retention periods. According to Legal Information Institute, each employer shall preserve basic records for at least 3 years. This three-year requirement applies to specific items listed in the regulation, such as a record of total dollar volume of sales or business and total volume of goods purchased or received during weekly, monthly, or quarterly periods. The rule specifies that these records must be kept in the form the employer maintains them in the ordinary course of business. Collective bargaining agreements and any amendments or additions thereto also fall under this three-year preservation mandate. These are wage-related records defined by the Electronic Code of Federal Regulations, not general tax documents.
A separate period applies to supplementary records. According to Legal Information Institute, each employer required to maintain records under this part shall preserve supplementary basic records for a period of at least 2 years. This two-year rule is distinct from the three-year rule for basic records. It does not replace the longer retention period; it sets a minimum for supplementary documentation. You should treat these two periods as separate categories when sorting your shop files. The wage rules define what payroll-related paperwork must stay, while the IRS rules define what tax-return-related paperwork must stay.
When you sort your files, place basic wage records in one stack and supplementary wage records in another. Label each stack with its respective time limit: three years for the basic set and two years for the supplementary set. This separation prevents you from discarding a document too early because you confused the two rules. The source text names the specific types of records covered by each period, so check whether your file matches the description before deciding which timeline applies. If a file contains both basic and supplementary elements, apply the longer of the two periods to ensure compliance. Your goal is to match each physical paper to the correct legal category based on its content and purpose.
What the Small Business Administration page calls common guidelines
The U.S. Small Business Administration describes its retention advice as "common guidelines." Their page states that these guidelines advise keeping records for anywhere from three to seven years. This range serves as a general benchmark for business owners, but it does not replace specific statutory rules found elsewhere.
You may be legally required to maintain tax and employment records, among other files, according to the same SBA source. This distinction matters because the three-to-seven-year span is a broad recommendation, while specific tax codes often dictate precise timelines for particular documents. Do not treat the SBA's general range as a substitute for the detailed periods outlined in the IRS section of this guide.
When sorting your shop files, use the SBA guideline only as a secondary check. If a file falls under a specific tax or wage rule, follow that exact period instead of the broader SBA suggestion. The SBA page notes that you may be legally required to keep certain records, so check the specific tax or wage rule first. Keep the SBA range in mind for miscellaneous administrative papers that do not fit into the specific tax or wage categories discussed in other sections of this article.
Illustrative example: one shop, three file types
Imagine a shop with three kinds of paper: a sales invoice from last year, a refund claim filed after its return, and a payroll sheet. The sales invoice falls under the ordinary case, so 3 years applies if no special situation does. The refund claim follows 3 years from the filing date or 2 years from the payment date, whichever is later. A payroll sheet used for employment tax follows at least 4 years after the tax becomes due or is paid, whichever is later. Each file gets its own period, so the shop does not apply one number to all three.
A worksheet procedure for one shop file
Pull one sales file from last year. Write the date it was created or received on the file. Set that date beside the three-year line in the reference table. The Internal Revenue Service states to keep records for 3 years if situations (4), (5), and (6) on the IRS page do not apply to you. Use this ordinary period as your starting point for files where no special condition applies. Compare that date against today’s date. If the gap is under three years, leave the file in its current storage location. If the gap exceeds three years, check whether any of the other periods described elsewhere in this guide apply to that specific document. Do not assume the three-year rule covers wage records or employment tax filings, as those follow separate timelines. This step isolates a single document so you can verify its retention status without sorting through the entire archive. Repeat this process for one file from each category until you have tested each type of record in your shop. Keep the worksheet simple: date, document type, and applicable period. This method prevents accidental disposal of files that still require retention under a different rule.
Related guides: Check 7 items before charging sales tax in your shop · Record 6 cash totals before you close the shop till · Sales tax rate: 4 inputs for setting a shop register.
FAQ on shop record retention
What period does the IRS page state when the special cases do not apply?
The IRS page states three years for general shop files when the special situations do not apply. It applies when no specific claim or omitted income condition triggers a longer period.
When is the period six years?
The Internal Revenue Service specifies keeping records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return. This condition requires the unreported amount to exceed one-quarter of the total income listed. If your reported income covers all earnings, this extended period does not activate.
When is it seven years?
The Internal Revenue Service indicates keeping records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction. This applies specifically to claims involving those types of losses. It does not apply to ordinary sales invoices or standard payroll documents.
How long does the wage-record page say to keep the basic records, and the supplementary records?
The Legal Information Institute states each employer shall preserve for at least 3 years the basic records. For supplementary basic records, the Legal Information Institute says to preserve them for a period of at least 2 years. These wage rules are distinct from the tax periods mentioned in the IRS guidance.
What does the Small Business Administration page mean by three to seven years?
The U.S. Small Business Administration notes that common guidelines advise keeping records for anywhere from three to seven years. It serves as a general recommendation for business owners managing their finances.