Business owners are required to retain certain types of documents, including those related to taxes, payroll, employment, finances, and contracts. How long you’re required to retain these records can vary from state to state.
Here’s a summary of the records you’re required to keep and the retention period. If your CPA or tax advisors recommend longer retention periods and additional documents to save, follow their advice as it pertains to your unique situation.
Employee & Payroll Records
These are regulated by the Department of Labor and Equal Employment Opportunity Commission:
- Payroll records: At least 3 years
- Timecards, wage calculations: 2 years
- Personnel and employment records: 1 year after termination
- I-9 forms (employment eligibility): 3 years after hire OR 1 year after termination, whichever is later
Tax Records (IRS Requirements)
Keep these records:
- Income statements, receipts, invoices
- Expense records
- Bank and credit card statements
- Tax returns and supporting documents
How long to keep records:
- 3 years: Standard minimum (from filing date or due date, whichever is later)
- 6 years: If you underreported income by more than 25%
- 7 years: For bad debt deductions or worthless securities
- Indefinitely: If you never filed a return or if you filed a fraudulent return
Financial & Corporate Records
Best practice (and often required for audits or legal protection) is to keep the following for 7 years:
- Financial statements
- General ledgers
- Accounts payable/receivable
Keep these documents permanently:
- Articles of incorporation
- Bylaws
- Board meeting minutes
- Stock records
Contracts & Legal Documents
- Active contracts: Keep for the life of the contract
- Expired contracts: Typically 3–6 years, depends on the statute of limitations in your state
Industry-Specific Rules
Some industries require longer retention:
- Healthcare (HIPAA): often 6+ years
- Financial services (SEC/FINRA): 3–6+ years
- Construction: varies by project liability timelines
Key Takeaways
- 3–7 years covers most records
- Keep critical legal and ownership documents forever
- When in doubt, keep records longer rather than shorter
- Maintain organized digital backups for safety and audits
Massachusetts and New Hampshire have some state-specific rules layered on top of the federal baseline, especially around tax and employment records. They’re not radically different from federal law, but there are a few important nuances.
Massachusetts
Businesses must keep “permanent books of account or records” sufficient to prove:
- Income
- Deductions
- Credits
Records must be:
- Accurate, complete, and organized
- Accessible for audit at any time
You are required to retain:
- Sales records (invoices, receipts, POS data)
- Journals and ledgers
- Inventory and asset records
- Tax returns + supporting schedules
- Payroll and wage records
The law focuses less on a fixed number of years and more on auditability and completeness.
Massachusetts generally aligns with federal rules regarding how long to retain records:
- 3–7 years for standard tax and financial records
- Longer if under audit or dispute
- Indefinitely if needed to substantiate filings or ownership
Employees have the right to:
- Review personnel files within 5 business days
- Receive copies upon request (same timeframe)
You must maintain organized personnel files to comply with access laws
Electronic Records & POS Systems
Massachusetts is stricter than many states on digital records. There is no simple “x years for everything” rule. The emphasis is on:
- Audit-ready records
- Complete accounting trail
- Accessible electronic systems
POS systems must:
- Maintain audit trails
- Track transaction details (date, payment method, etc.)
- Prevent tampering (anti-“zapper” rules)
New Hampshire
Businesses must keep records sufficient to determine:
- Business profits tax
- Business enterprise tax liability
Typical retention expectation:
- 3 years minimum (audit window)
- Longer if under audit or amended filings
Like MA, the focus is on substantiating tax filings, not just a fixed timeframe.
Employee & Payroll Records
New Hampshire largely follows federal standards:
- Payroll records: 3 years
- Wage/hour documentation: 2–3 years
- Personnel files: typically at least 1 year after termination
Corporate & Legal Records
- Contracts: retain for at least 3–6 years (statute of limitations is generally 3 years in NH)
- Corporate governance records: keep permanently
Safe retention policy:
- 7 years for financial/tax records
- At least 3 years for payroll
- Permanent for corporate/legal docs
Sources:
https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping
https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records
https://www.irs.gov/businesses/small-businesses-self-employed/employment-tax-recordkeeping
https://www.dol.gov/agencies/whd/fact-sheets/21-flsa-recordkeeping
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