Keeping good financial records is important even if you haven’t filed taxes in a while. Non-filers still need to track income and expenses in case the IRS contacts them. This guide covers what records to keep, how long to keep them, and why it’s important.
Why Record-Keeping Matters
You might think you don’t need to keep records if you haven’t filed taxes. However, the IRS can pursue unfiled returns for up to six years (longer if fraud is involved). Organized records can help you file past-due returns, avoid penalties, and correct any mistakes the IRS may make in estimating your tax liability.
Accurate records are essential to qualify for IRS programs like Offer in Compromise (OIC) or Currently Not Collectible (CNC) status. These require proof of financial hardship, which you can’t show without the proper documents.
Record Keeping for Small Business Owners
Small business owners and self-employed individuals are likelier to fall behind on tax filings. Record keeping is even more important for these individuals, as their income and expenses are often complex.
If you’re a small business owner who hasn’t filed, be sure to keep:
- Income Records: Keep sales receipts, invoices, 1099 forms, and payment platform records (PayPal, Stripe, etc.).
- Expense Receipts: Save receipts for business expenses like office supplies, advertising, or vehicle costs.
- Business Bank Statements: Keep business bank and credit card statements to verify income and expenses.
- Payroll and Contractor Records: Maintain payroll records and Forms 1099 for contractors.
- Asset and Inventory Records: Track inventory and equipment depreciation for tax deductions.
How Long to Keep Records
The IRS recommends keeping records for at least three years after filing, but the clock doesn’t start until the return is filed for non-filers. To be safe, hold on to records for at least six years.
Conclusion
Good record-keeping is essential for non-filers, especially small business owners. Whether you need to file past-due returns or prove financial hardship, organized records will help you get back on track with the IRS. Take the time to sort through your receipts and statements now—it will save you stress later.
