Quick answer
The IRS sets the baseline: keep records for 3 years in the general case. That period stretches to 6 years if a return under-reports income by more than 25% of the gross income shown on it, and to indefinitely if no return is filed or a fraudulent return is filed. Separate periods apply to bad debt and worthless securities claims (7 years), employment tax records (at least 4 years), payroll records for employers (at least 3 years under the Fair Labor Standards Act), and sales and use tax records in California (at least 4 years). What counts as a record is, in the IRS's words, the paperwork behind every deposit and expense: invoices, bank statements, receipts and canceled checks. A separate business checking account is where those records start. ZenBusiness handles the entity, EIN and registered agent that come before it, and its ZenBusiness accounting page explains accounting basics for new owners.
What financial records does a small business need to keep?
The IRS does not hand over a single list headed "required records." Its guidance in Publication 583 instead describes the kinds of documents that back up what a business reports, and the periods for which they should be kept. The two questions are linked: a record is only useful if it exists, can be found and can be matched to a transaction.
For a freelancer or solo operator, the records fall into four groups. There are records of money coming in, records of money going out, records of assets, and, where relevant, records of employees and sales tax. Each group has its own supporting documents and its own retention logic.
This page sets out what the official sources say about each. Where a rule is not covered here, such as the sales tax rules of states other than California, the page says so rather than guessing.
Where should record keeping start?
With the account the money moves through. Publication 583 says one of the first things to do when starting a business is to open a business checking account, and to keep it separate from a personal checking account.
The IRS also says the business account should be used for business purposes only. It tells owners to indicate the source of deposits and the type of expense in the checkbook, and it describes the business checkbook as the basic source of information for recording business expenses.
That guidance is the foundation of everything below. A freelancer who runs client payments and personal groceries through the same account has records that are hard to sort and harder to defend. A separate account makes every later step simpler.
Which supporting documents does the IRS name?
Publication 583 groups supporting documents by what they support. For gross receipts, it lists cash register tapes, bank deposit slips, receipt books, invoices and credit card charge slips. For purchases and inventory, it lists canceled checks, cash register tape receipts, credit card sales slips and invoices.
For expenses, the IRS lists canceled checks, cash register tapes, account statements, credit card sales slips and invoices. For assets, it lists purchase and sales invoices, real estate closing statements and canceled checks.
In practice, a freelancer's file usually contains client invoices, bank and card statements, receipts for software, equipment and travel, and contracts or purchase invoices for larger items such as a laptop. Digital copies are common. The IRS also has a separate recordkeeping page covering electronic records, which is not summarized here.
How long should records be kept?
The IRS page on how long to keep records gives 3 years as the general period. That default applies unless one of three exceptions does. The exceptions are under-reporting income by more than 25% of the gross income shown on the return, not filing a return at all, and filing a fraudulent return.
The periods that follow are the IRS's, as listed on that page:
- 3 years in the general case.
- 6 years if income that should have been reported was not, and it is more than 25% of the gross income shown on the return.
- 7 years for a claim for a loss from worthless securities or a bad debt deduction.
- Indefinitely if no return is filed, or if a fraudulent return is filed.
- At least 4 years for employment tax records, counted from the date the tax becomes due or is paid, whichever is later.
For most freelancers with straightforward finances, the 3-year default is the operative one. The longer periods are reasons to avoid treating the default as a deadline for discarding everything. A tidy archive that is easy to search costs little, and a missing record can cost far more.
What about the 6-year rule?
The 6-year period applies when a return leaves out income that should have been reported and the omitted amount is more than 25% of the gross income shown on the return. It is an exception to the 3-year default, not an addition to it.
The practical point for a freelancer is that income can be easy to under-record. Payments arrive through several channels, such as bank transfers, payment apps and checks, and a missed stream can add up. Recording every deposit with its source, as Publication 583 advises, is the guard against that.
Whether a particular situation triggers the exception is a question for a tax professional. This page only reports the rule as the IRS states it.
Do bad debts and worthless securities matter to a freelancer?
Sometimes. The IRS lists 7 years for a claim for a loss from worthless securities or a bad debt deduction. A freelancer who writes off an unpaid client invoice as a bad debt, or who holds securities that become worthless, would want records that cover that claim for the longer period.
Most freelancers will never use this rule. It is included because it is the longest fixed period on the IRS list, and because it is easy to miss when clearing out old files.
Which debts qualify for a deduction, and under what conditions, is not covered here.
What record periods apply to employees?
A freelancer with no staff can skip this section. One who hires an employee takes on additional obligations.
The IRS says employment tax records should be kept at least 4 years after the date the tax becomes due or is paid, whichever is later. Separately, the US Department of Labor's Fact Sheet 21 says each employer must preserve payroll records for at least three years under the Fair Labor Standards Act.
The same fact sheet sets 2 years for supporting records: time cards, piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages. The two periods overlap but are not identical, so the longer one governs where both apply.
Which workers count as employees rather than contractors is a separate question that this page does not address.
What about sales and use tax records?
Sales tax is set by states, and this page covers only California. The California Department of Tax and Fee Administration's Publication 116 says sales and use tax records must be kept at least 4 years. During an audit the period extends: all records covering the audit period should be retained until the audit is complete.
A freelancer selling taxable goods, or services that a given state taxes, should check the rules of that state's tax agency. The retention rules of states other than California are not covered on this page.
Many service-based freelancers do not collect sales tax at all. Whether a freelancer's work is taxable depends on the state and the service, and that is not covered here.
How does this fit into a bookkeeping routine?
The periods above only help if records can be found. A workable routine has four parts. Use one business account. Label the source of each deposit and the type of each expense. File every invoice, statement and receipt in one place as it arrives. Keep that archive for the longest period that could apply, rather than the shortest.
The recording itself can be done in a spreadsheet, in software, or by a service. The retention rules do not care which. They care that the records exist and can be produced.
Where does ZenBusiness fit?
ZenBusiness sits upstream of the records. It forms the business entity and handles items such as the EIN and registered agent, which come before a business account can be opened in the business's name. It also offers a free accounting consultation to customers who form an entity through it.
One point to state plainly: ZenBusiness shut down its banking service, so the business checking account that the IRS recommends has to be opened with a bank elsewhere. The IRS guidance applies whichever bank is used.
For a freelancer who wants one provider for formation and later bookkeeping support, that bundle is a real convenience. For one who already has an entity and an account, it adds little to the retention question, which depends on habits rather than on a vendor.
Which options can handle the recording?
The options below are listed alphabetically. The order is not a ranking. Prices were checked on each provider's own pricing page on 2026-10-06 and may have changed since. Promotional rates are labeled separately from ongoing prices.
As of 2026-10-06, ongoing prices are Lite at $23 per month, Plus at $43 per month and Premium at $70 per month. Select is quote-only. A promotional rate of $1 per month for one year applies to Lite, and it is not the ongoing price. Best for freelancers who want to do their own books and expect to move up a tier as client work grows.
QuickBooks Solopreneur costs $20 per month at the time of writing. A promotional rate of $10 per month for 3 months is offered, and it is not the ongoing price. Best for freelancers who want a widely recognized name and are comfortable working in software. Those who later want human help may look at QuickBooks Experts, the current name for the service formerly called QuickBooks Live.
Wave's Starter plan is free. Pro is $19 per month or $190 per year, with a promotional $9.50 per month for 3 months that is not the ongoing price. Card processing is 2.9% + $0.60, the receipts add-on is $8 per month, and payroll starts from $25 per month, all as of 2026-10-06. Best for freelancers on a tight budget who will handle their own recording.
Xero's plans are Early at $27 per month, Growing at $59 per month and Established at $97 per month. A promotional offer of 80% off for 3 months exists, and it is not the ongoing price. Best for freelancers expecting the business to add complexity over time and wanting a platform that scales with it.
ZenBusiness Money Pro is $30 per month, sold as an add-on alongside formation, according to ZenBusiness's own site. The published features are custom invoicing, revenue and expense tracking, and tax preparation tools. It is a service rather than accounting software, so a feature-by-feature comparison with the tools here would mislead, and any detail beyond those three features, including plan tiers, is not published. Best for freelancers who would rather hand off the recording than learn a tool, particularly those forming an LLC who want the entity work and the bookkeeping support from one company.
Zoho Books has a Free plan at $0, limited to businesses under $50K in annual revenue. Paid tiers are Standard at $20 per month, Professional at $50 per month, Premium at $70 per month, Elite at $150 per month and Ultimate at $275 per month. Best for freelancers who want a free starting point with a long upgrade path, provided revenue stays under the free-plan limit.
What should a freelancer do this month?
Confirm that business and personal money are separate. If they are not, open a business checking account and route everything through it from now on. Gather the supporting documents the IRS names into one folder, and name files so each can be matched to a transaction.
Then set a retention rule: keep everything for the longest period that could plausibly apply to the business, and note any year with an unusual event, such as an audit, a bad debt write-off or a first hire. Choosing a recording method can follow. For a freelancer comfortable with software, a free or low-cost tool is probably enough, and that is a plain concession to the dedicated tools. For one who prefers to hand the work off, a bundled service is a reasonable alternative.
Sources
- Internal Revenue Service, "Publication 583, Starting a Business and Keeping Records"
- Internal Revenue Service, "How Long Should I Keep Records?"
- U.S. Department of Labor, "Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA)"
- California Department of Tax and Fee Administration, "Publication 116, Retaining Records"
- Internal Revenue Service, "Recordkeeping"
This is general information, not legal, tax or accounting advice, and requirements vary and change.