A small business should save monthly and quarterly bank statements until it receives year-end statements, according to Entrepreneur. If the statements prove a deductible purchase or expense or support tax returns, the business needs to keep them for three years, and six years if the business anticipates an IRS audit.
If the IRS suspects a business made a substantial error in its tax returns, the agency can audit the business up to six years after the filing, notes Entrepreneur. When the IRS suspects fraud, there is no limitation on commencing an audit. Although the records may not be needed for tax purposes, small business owners must determine whether they need to retain the records for other reasons, such as property transfer, insurance or credit requirements, according to the IRS.