How long do I need to keep all these records after my small business bankruptcy filing?

Thank you for the detailed answer! We had a Chapter 7 liquidation, so it sounds like 7 years would be sufficient. Does that mean 7 years from when the bankruptcy was discharged (2023) or 7 years from when we last filed taxes for the business (2022)? Also, what about employee records? We had about 12 staff members when we closed. Do we need to keep all their W-2s and payroll info for the same 7-year period?

The 7-year period generally starts from the date of discharge, so in your case, from 2023. That's when the legal process was completed, which is what matters most for record retention. For employee records, yes, those should be kept for the same 7-year period. This includes W-2s, payroll information, and any employment tax documents. The IRS can audit employment taxes for up to 7 years, so having those records available until 2030 would be prudent in your situation.

That sounds useful but how does it actually work? Do you have to scan every single document or can you just describe what kinds of papers you have? My dad has boxes from a business that closed 5 years ago and we're also trying to downsize.

I'm skeptical about this. How does some AI tool know specifically about bankruptcy record requirements? Those vary by jurisdiction and can depend on your specific case details. Did it really catch all the nuances of what you legally needed to keep?

You don't need to scan everything - you can upload photos of stacks of documents and it identifies document types from there. It can also work from descriptions of document categories if you provide enough detail. It has you separate documents into basic categories first (tax returns, receipts, legal documents, etc.) which speeds things up. The bankruptcy knowledge comes from their database of retention regulations. It asked me specific questions about my bankruptcy type, discharge date, and whether there were any unusual circumstances or ongoing obligations. It was pretty thorough and even flagged some documents related to business property that I would have mistakenly shredded.

Wait, how does this work? I thought it was impossible to get the IRS on the phone these days. I've been trying to call about some business tax issues for weeks. Is this just a paid service that puts you on hold?

Sorry, but this sounds like a scam. No way some random service can get you through to the IRS faster than calling directly. They probably just put you on hold like everyone else but charge you for it. Did you actually verify you were talking to a real IRS agent?

It's not a call service - they use a system that navigates the IRS phone tree and waits on hold for you, then calls you when an actual agent is on the line. So instead of you waiting on hold for hours, their system does it for you, and you only get called when there's a live person ready to talk. Yes, it was definitely a real IRS agent. They had access to all my tax history and bankruptcy records filed with the IRS. The agent even sent me follow-up information through my IRS online account portal, which only actual IRS employees can do. I was able to get specific answers about which business property sale records I needed to keep related to my bankruptcy discharge.

This is such a smart system! Did you scan any of the documents to digital before shredding? My accountant suggested keeping digital copies but I'm worried about security and organization.

I did scan the "forever" documents and the most important "seven-year" documents (anything related to significant assets or large debts that were discharged). I didn't bother with scanning routine papers. For security, I saved everything to an encrypted external hard drive rather than cloud storage, and I keep that in the same fireproof box as my permanent physical records. The file organization is simple - I just created folders by year and then by category (tax, legal, assets, etc.). Nothing fancy but it works and I can find things when needed.

Oh wow, that's a really good point I hadn't considered. We're in California - does anyone know what the state retention requirements are for bankruptcy records here? I definitely don't want to get hit with a surprise audit years later.

California has a 4-year standard statute of limitations for tax assessments, BUT it extends to 8 years if there's substantial underreporting (like more than 25% of gross income). For sales tax specifically, they can sometimes go back 8 years regardless. The tricky part with bankruptcy is that California's Franchise Tax Board can still pursue certain tax obligations even after federal discharge. I'd keep California-specific tax docs (especially sales tax records) for at least 8 years to be safe.

This is incredibly helpful advice! I especially appreciate the tip about creating a spreadsheet with shred dates - that's exactly the kind of systematic approach that might help convince my dad we're not just randomly tossing important documents. Quick question about the asset sales records you mentioned: our restaurant had some equipment that was sold through the bankruptcy process, but I think all the gains/losses were reported on our final business tax return in 2022. Would we need to keep those equipment sale records until 2029 (7 years from the 2022 return) or 2030 (7 years from the 2023 discharge)? Also, did you find any specific documents that seemed obviously important but actually turned out to be safe to discard? I'm trying to build a case for my father that we don't need to keep every single invoice and receipt from 2019-2022!

For the equipment sale records, I'd go with 7 years from when you filed that 2022 return (so keep until 2029), since that's when the IRS statute of limitations runs on that specific return. The bankruptcy discharge date matters more for the court documents and debt discharge records. As for documents that seemed important but were actually safe to discard - oh boy, yes! We kept every single vendor invoice and receipt thinking we might need them, but honestly, once the bankruptcy was discharged and final tax returns filed, most routine operating expenses from before the filing became irrelevant. Things like office supply receipts, small repair bills, monthly utility statements - none of that matters for tax purposes years later. The key insight my CPA gave me: if it wouldn't help you in an IRS audit of a specific tax year, and it's not related to a major asset or ongoing legal obligation, you probably don't need it. Most day-to-day business receipts fall into this category. Focus on keeping the "big ticket" items - equipment purchases/sales, major contracts, loan documents, and anything that affected your tax basis in assets.

This is such a practical approach! I love the idea of taking photos of representative documents to show a professional - that's a brilliant way to get expert validation without paying for hours of document review time. Your point about routine operational paperwork becoming irrelevant after discharge really resonates. I think my dad's anxiety comes from not understanding the legal distinction between "this was once important for running the business" versus "this is still legally required after bankruptcy." The three-pile system sounds like it would help visualize that difference. Quick question: when you showed those sample documents to your bankruptcy attorney, did they charge you for that consultation, or was it considered part of your ongoing case? I'm wondering if it's worth reaching out to our original bankruptcy lawyer for this kind of guidance, or if we should consult with a tax professional instead. Also, going from 12 boxes to 2 is incredible! That must have felt so liberating, especially knowing you had professional backing for those decisions.