Everyone in business must keep records. Good business record keeping is very important to your business - it will help you monitor progress, prepare your financial statements, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns. Business records can be divided into three categories: income, expenses, and capital expenditures.
The IRS normally has three years to audit you and your business. Some state agencies have longer statute of limitations than the IRS, so to be safe, it's best to keep all tax-related documents for longer than three years.
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