What Records Need To Be Kept For 7 Years latest 2023

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How Long Should Home Business Owners / Network Marketing Businesses Keep Tax Records?

A common question asked by network marketers is “How long should I keep my tax returns and tax records?”

The IRS normally has 3 years to audit you and your business from the date you file your return. So that makes 3 years the absolute minimum period to keep your tax records. However, if your return contains serious tax reporting errors, the IRS can roll back 6 years.

State tax agencies may also inspect your records, and their statutes of limitations vary. Considering all the laws, my recommendation is to keep your tax records for at least 7 years. This includes not only a copy of the statement, but also expense receipts, customer invoices, bank statements, appointment schedules, mileage logs – keep it all!

If your “home office” space does not allow for 7 years or more of document storage, you may want to set up an area of ​​your home for long-term document storage. Areas such as a corner of your basement, attic, or garage work best. I recommend filing tax returns and records in plastic storage containers, which won’t weaken or be sensitive to moisture over time like cardboard filing boxes. Organize tax records by year, with the most recent at the forefront. Label each container; this will make it easier to locate the files later.

Why all these problems storing old tax records? Because the day may come years from now when an IRS agent asks you for backup documents to support a tax deduction you claimed. The best way to comply with this request, and at the same time increase the chances of justifying the deduction, is to follow these tips:

• Keep your records for seven years to allow you to prove the deductions to which you are legally entitled.

• The burden of proof is on you, not the IRS agent, so be prepared to argue your case.

• For the IRS, anything and everything is taxable income…unless it’s on their list of exceptions.

• For the IRS, no expense is a deductible expense, unless the IRS code deals with exceptions.

• Keep your records accurate, complete and up to date.

• Don’t think that the day-to-day obstacles to growing your network marketing business are an acceptable excuse to put record keeping on the backburner.

• Obtain and use a business credit card, or designate one or more personal cards for business use only.

• Open a professional current account, exclusively for professional use.

Home-based business owners should obtain a copy of IRS Publication 583, “Starting a Business and Keeping Records,” for more details on IRS record-keeping requirements.

Jim Flaauus, President/CEO of Anchor Accounting & Tax, is a network marketing/MLM tax specialist. He connects with home business owners and network marketers across the country and around the world by phone, email and fax to help them plan and prepare their tax returns.

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