As you know, the federal tax laws require taxpayers to maintain the books and records needed to support amounts reported on federal tax returns. These days, many taxpayers keep some or all of their financial and tax records in an electronic (computerized) format. The IRS has issued guidelines for such computerized records.  If these are not followed, the government can potentially seek civil and criminal penalties. We are, of course, available to consult with you to make sure you and your business avoid penalty exposure by being in full compliance with the new computerized recordkeeping rules.

In addition, this is an appropriate time for a reminder on how long tax records—computerized or hard copy—must be maintained. The general rule is records must be kept as long as they may be relevant to a taxpayer’s claim for tax record or refund or to an IRS attempt to assess additional tax for the year in question.

The specific rules relating to the length of time records must be kept are quite detailed. However, we recommend the following record retention periods as general guidelines. In some cases, the recommendation may be for nontax reasons. For example, real estate records should be kept forever for environmental liability exposure reasons. Remember, these are general guidelines.

*From the later of the tax return due date or filing date
**Longer if you use LIFO