Generally speaking, you should keep your tax records and receipts for three years - keep in mind it can be longer in certain cases. Please refer to the chart below for the document types and how long it is recommended to keep them.
| Record type | How long to keep it |
|---|---|
| Past tax returns | 3 years |
| Receipts | 3 years |
| Miscellaneous financial records | 3 years |
| Employment tax records | 4 years |
| Income not reported in a previous tax return | 6 years |
| If you deducted the cost of bad debt or worthless investments | 7 years |
Recordkeeping Best Practices for Insurance Agents
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A good rule of thumb is that if an item can be used as evidence to support income, deduction or credit on your tax return, always keep the receipts, invoices, bank statements and payroll records. NOTE: This is not an extensive list of items, and other documents may be necessary depending on the type you have.
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Refer to the chart above. A good measure is to keep documents for at least three years.
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Store everything electronically and make sure to have a backup. We recommend you use The Club Capital Portal as well as other cloud-based storage solutions.
What documents should you keep for taxes?
As mentioned above, if a document can be used to as evidence to support income, an expense or a credit, the IRS requires that you keep records of it for a minimum of three years.
Here are the main types of records you should hang on to:
- Receipts
- Deposit information for cash and credit sales
- Bank/Credit Card statements
- Payroll Records
- Tax filings
- W2 and 1099 forms
- Any other document that supports of income, credit or deduction on your tax return
While not necessary to do your taxes, we also recommend these types of documents at hand:
- Any contracts you’ve signed (think clients, vendors, contractors, employees, etc.)
- Articles of incorporation
- Business permits
- Company health, safety, and any other regulatory documents
- Annual reports (state and/or county if applicable)
Remember, it's on you to prove what you're reporting on your taxes, therefore you must store documents that can be used as evidence to corraborate the numbers you're presenting.
We know this is a lot of recordkeeping. What can you afford to not keep?
Receipts for some items can get lost. Can you still claim those expenses as tax deductions?
Maybe, if the expense is less than $75
Generally speaking, you can get away with not keeping a document for three reasons:
- The expense is less than $75. (Note: this doesn’t apply to lodging expenses.)
- The expense is for transportation (train, taxi, etc), and it’s not easy to get a proper receipt.
- The expense being reported is for lodging or meal expenses under an accountable plan with a per diem allowance.
It is important to remember, however, that all business expenses/deductions on your tax return can be questioned during an audit (incuding expenses under $75).
In order for the IRS to sustain a deduction under $75 without a receipt, you’ll have to provide the following information:
- The expense amount
- Where and when it was made
- The essential purpose of the expense
If you’re deducting meals and entertainment, it’s even more complicated. As a rule of thumb, no matter the expense amount keep a copy of your receipts in the cloud - such as The Club Capital Portal.
Besides the instances outlined in the chart above, be sure to keep records for longer than three years if..
You file a fraudulent return, or no return at all
There’s no statute of limitations on fraudulent or unfiled returns—so the IRS can come after you forever.
You have records connected to property
The generally-recommended three year period of limitations applies to any deductions you make related to your property (depreciation, loss from a sale, etc.). Sometimes, however, the length of time between when you dispose/sell a property and when you no longer need to keep those documents can be longer than 3 years.
For example: If you sell a property in the 2019 tax year, then report the financial gain on your 2020 tax return, and finally file your tax return on April 15, 2021. In this case, you’d need to keep records connected to the property until April 17, 2024 - three years after the filing date of April 15, 2021).
These records can include include deeds, titles, and cost basis records (i.e receipts for equipment) and more.
The easiest way to keep records
The IRS says you can use any recordkeeping system as long as it “clearly shows your income and expenses”. You can imagine this is a lot of records to keep. For that reason, we recommend using either The Club Capital Portal if you're a client or a cloud-based storage solution. Simply scan the item, and upload. It's good practice to do this at least once a week.
As long as they’re identical to the originals, the IRS accepts digital copies.
If you do end up going the paperless route, be sure to keep a backup of your documents in a secure second location.