Record retention is a must, whether for personal, business, or tax
reasons. However, record retention is necessary only to the
extent it serves a useful purpose or satisfies legal requirements.
For example, generally the IRS must assess additional tax within
three years after the later of filing of a return or its due
date. The period is six years if the taxpayer omits items of
gross income that in total exceed 25% of gross income
reported on their return. If a fraudulent return is filed or
if no return is filed there is no limit to the period the tax
can be assessed. In practice, however, most individuals and
businesses retain records based on available space.
Below is a recommended record retention schedule for some of the
more common items for businesses and Individuals.