What Business Records the IRS Most Often Requests

Why this matters

When the IRS asks for records it’s trying to confirm the numbers on your tax return. Well-organized documentation can preserve deductions, avoid penalties, and shorten the time needed to resolve an inquiry. In my 15 years advising small businesses, I’ve seen audits resolved in weeks when clients provided a clear audit file, and stretched into months when records were scattered or missing.

Most-requested records (overview)

• Tax returns and supporting schedules (including prior years).
• Bank statements and canceled checks.
• Receipts and vendor invoices for deductible expenses.
• Payroll records, W-2s, Form 941/940 support, and employee benefit documentation.
• 1099s issued and received, and contractor agreements.
• General ledger, trial balance, and reconciliations.
• Asset purchase records and depreciation schedules (Form 4562 support).
• Sales records, point-of-sale reports, and merchant-processor statements.
• Contracts, leases, loan documents, and insurance policies.
• Inventory records, cost of goods sold worksheets, and mileage logs for business vehicles.

Authoritative guidance

The IRS discusses recordkeeping basics in Publication 583, Starting a Business and Keeping Records (IRS Pub 583). For retention timing and specific rules see the IRS recordkeeping page and the “period of limitations” guidance (IRS). These pages explain why you may need 3, 6, or more years of history depending on your situation (IRS Pub 583; Topic No. 152). Always consult the specific IRS guidance for the tax years in question (IRS.gov).

Which documents the IRS typically asks for — and why

1) Tax returns and supporting schedules

• Why: To compare reported income, deductions, credits, and carryforwards across years.
• What to include: Copies of filed returns, amended returns, and the schedules or worksheets that produced totals.

2) Bank statements and canceled checks

• Why: To trace cash flow, deposits that indicate income, and payments used as deductible expenses.
• What to include: Monthly statements, check images, ACH records, and bank reconciliations.

3) Receipts, invoices and vendor bills

• Why: To substantiate business expenses and the purpose of each expenditure.
• What to include: Itemized receipts, vendor invoices, proof of payment, and expense categorizations.

4) Payroll and employment tax records

• Why: Employment taxes are frequently audited for withholding and correct reporting of wages.
• What to include: Payroll registers, W-2s, Forms 941/940 and supporting calculations, 1099-NEC/1099-MISC issued to contractors, timecards, and benefit plan records.

5) 1099s, contractor invoices and agreements

• Why: The IRS uses information returns to cross-check income reported by recipients.
• What to include: Copies of 1099s filed, contractor agreements, and evidence you issued forms correctly.

6) Asset and depreciation records

• Why: To verify basis, depreciation, dispositions and casualty losses.
• What to include: Purchase invoices, invoices for improvements, asset entries in your fixed-asset schedule, and Form 4562 worksheets (see IRS Form 4562 guidance).

7) Sales and revenue documentation

• Why: To confirm gross receipts and to reconcile reported sales tax or excise tax.
• What to include: Point-of-sale reports, merchant-processor summaries (Stripe, PayPal), deposit slips, and sales journals.

8) Contracts, leases, and loan documents

• Why: To substantiate business purpose, rent and interest expenses, and related-party transactions.
• What to include: Signed leases, promissory notes, loan amortization schedules, and settlement statements.

9) Inventory and cost-of-goods-sold workpapers

• Why: Industries with inventory require documentation to support COGS and ending inventory values.
• What to include: Physical counts, valuation methods, invoices for purchases, and production records.

How long to keep records (practical guidance)

• Standard rule: Keep records for at least 3 years after the date you filed the return or 2 years from the date the tax was paid, whichever is later (IRS general guidance).
• Substantial underreporting: Keep records for 6 years if you omitted more than 25% of gross income (IRS period-of-limitations guidance).
• Employment tax records: Keep for at least 4 years after the date the tax is due or paid (IRS Pub 15 and payroll guidance).
• Property and depreciation: Keep until the period of limitations expires for the year in which you dispose of the property (IRS Pub 583).
• Forever: Keep records related to basis or items needed to prepare your tax return (for example, records that support basis in real property) for as long as they are needed to calculate gain or loss when you sell (IRS guidance).

(These are general rules — your situation may require longer retention. See IRS Publication 583 and the IRS recordkeeping pages for details.)

How to organize records to meet an IRS request

• Create an audit file. Include a cover letter identifying the tax year(s) and a concise index of documents. See our guide on Building an Audit File: Documents That Strengthen Your Case for examples. (Internal link: Building an Audit File: Documents That Strengthen Your Case — https://finhelp.io/glossary/building-an-audit-file-documents-that-strengthen-your-case/)
• Use accounting software and export reports. Vendors like QuickBooks, Xero or FreshBooks produce trial balances, general ledgers and transaction reports that are audit-friendly.
• Reconcile before you send. Match bank statements to your ledger and annotate any large or unusual transactions.
• Group documents by tax-return line item. For example, bundle all vehicle logs and mileage substantiation for auto deductions into one folder.
• Use searchable digital files. Scan paper records to searchable PDFs; preserve originals for items the IRS may want to inspect in-person.
• Protect sensitive data: redact unrelated third-party personal information before sending, but don’t remove essential tax substantiation.

How to respond to different IRS requests

• Correspondence audit (mail): Generally the IRS will request specific documents by mail. Respond promptly and only send what was requested. Our article Preparing a Response Package for an IRS Correspondence Audit walks through a sample package and timeline. (Internal link: Preparing a Response Package for an IRS Correspondence Audit — https://finhelp.io/glossary/preparing-a-response-package-for-an-irs-correspondence-audit/)
• Field audit (in-person): Gather a fuller set of books and have your accountant or representative present. Keep originals organized and readily available. See Preparing for a Field Audit: Documentation and Interview Tips for checklists. (Internal link: Preparing for a Field Audit: Documentation and Interview Tips — https://finhelp.io/glossary/preparing-for-a-field-audit-documentation-and-interview-tips/)
• Virtual audit: The IRS increasingly conducts remote reviews. Use secure document-sharing and follow IRS instructions about file formats and portals. See Preparing a Virtual Audit: How to Share Documents Securely with the IRS for best practices.

Common mistakes I see in practice

• Sending incomplete packets: Omitting bank reconciliations or failing to tie receipts to line items creates extra questions.
• Poor organization: Unindexed file folders force examiners to rebuild your accounting timeline.
• Missing 1099s or W-2s: Information-return mismatches generate immediate adjustments and penalties.
• Over-redacting: Removing facts the IRS needs to verify a claim can be worse than sharing them with appropriate protections.

Professional tips to reduce risk

• Conduct internal reviews quarterly: Reconcile accounts and fix discrepancies early.
• Maintain both digital and physical backups in separate locations.
• Implement internal controls around contractor payments and payroll.
• Keep a contemporaneous mileage log or use an approved app to substantiate business miles.
• When the IRS asks, acknowledge receipt quickly, provide a reasonable timeframe for delivery, and use a traceable delivery method.

Costs, penalties and appeals

If documentation is missing, the IRS may disallow deductions, assess additional tax, and charge penalties and interest. If you disagree with an adjustment, you can appeal via the IRS Office of Appeals and follow administrative remedies. If the case proceeds, maintain your documented audit file—the better your contemporaneous records, the stronger your position.

Where to get credible help

Consult an enrolled agent, CPA, or tax attorney if an audit appears likely or if the IRS has proposed significant adjustments. In my practice, bringing a tax professional into the conversation early reduces the chance of missed items and prevents avoidable penalties.

Authoritative sources and further reading

• IRS Publication 583, Starting a Business and Keeping Records (IRS.gov) — https://www.irs.gov/publications/p583
• IRS recordkeeping overview (IRS.gov) — https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping
• IRS Topic No. 152, How Long To Keep Records — https://www.irs.gov/taxtopics/tc152
• SBA — Business Tax Information — https://www.sba.gov/business-guide/manage-your-business/pay-taxes

Professional disclaimer

This article is educational and general in nature and does not constitute individualized tax advice. Rules change and facts matter — consult a qualified tax professional before relying on this information for your specific situation.