Our firm at Fresh Start Tax is asked this question almost every time we have a speaking engagement. With former IRS Audit Agents on our staff, we have the knowledge to represent you if you are having IRS Issues or going through a tax audit. Let a former IRS Tax Audit Manager represent you.
The main question we are asked:
How long should the records related to a business or other long-term asset be kept?
Answer: In the case of an asset, records related to the asset should generally be kept for as long as you have the asset plus three years. If the asset was exchanged, the basis for the new asset may include the exchanged asset so the records for both assets will need to be retained until the new asset is disposed plus three years from the file date of the tax return for the year of disposition.
How long should payroll records be kept?
Answer: In general, payroll records should be kept for six years with a review of the file to see if any items relating to current employees should be retained with current records.
As a reminder, Tax Fraud has no statute.  The IRS can go back as far as they deem necessary.