Question: We have some very thickfiles, so we’re wondering what we need to keep and for how long. We’d also like to confirm that time cards must be kept for seven years.
Answer: Tax data must be kept for the later of four years after the due date of the tax for the return period to which the records relate, or the date the tax is paid. But good record-keeping requires that records be kept for a much longer period of time.
The IRS has until the later of three years after a return was due or filed to assess additional taxes and penalties. After the assessment, it has an additional 10 years to begin the collection process.
Wage-and-hour data must be kept for three years (wage-and-hour and tax data are basically the same). Time cards, wage-rate tables, etc., should be kept for two years, but state laws may require you to keep records for longer periods of time.