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Taxes: Record Retention Guidelines

Taxes Record Retention Guidelines

When deciding upon a firm’s record retention procedures, it would be wise to consult federal and IRS regulations and state and local government record retention requirements. The IRS generally must assess additional tax within 3 years after the due date on a return. (So, keep records for 3 years.) A period of 6 years applies if the taxpayer omits items of gross income that in total exceeds 25 percent of gross income reported on the return. (Therefore, keep records for 6 years.) If a fraudulent return is filed or no return is filed, there is no limit to the period the tax can be assessed. (So, retain records permanently.)*

*See “How Long Should I Keep Records?” at
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-long-should-I-keep-records

Record retention policies are generally based on two questions:

  1. What must I keep?
  2. How long do I have to keep it?

The suggested retention periods listed below have no legal authority and are simply guidelines for use in dictating your firm’s record retention needs. In certain situations, it might be appropriate to keep records for longer periods than legally required.   

FOR BUSINESSES
DOCUMENT            RETENTION PERIOD
Accounts Payable – Ledgers and Schedules 7 years
Accounts Receivable – Ledgers and Schedules 7 years
Audit Reports of Accountants Permanently
Bank Reconciliations 3 years
Capital Stock and Bond Records Permanently
Cash Books Permanently
Checks (canceled in general) 7 years
Checks (canceled for important payments,
taxes, property purchases, special contracts,
etc. – file with papers of related transaction
Permanently
Contracts and Leases (expired) 7 years
Contracts and Leases Still in Effect Permanently
Correspondence, general 3 years
Correspondence, legal and important matters only Permanently
Deeds, Mortgages, Bills of Sale Permanently
Depreciation Schedules Permanently
Duplicate Deposit Slips 3 years
Employee Expense Reports/Personnel Records
(after termination)   
7 years
Employment Applications 3 years
Financial Statement (end of year) Permanently
Freight Bills, Bills of Lading 7 years
Garnishments 7 years
General Ledgers Permanently
Insurance Policies (expired) 7 years
Insurance Records (accident reports, claims,
policies, etc.)
Permanently
Inventory Listings and Tags           7 years
Invoices 7 years
Patent/Trademark Papers Permanently
Payroll and Purchase Journals Permanently
Property Appraisals by Outside Appraisers 7 years
Tax Returns and Worksheets Permanently
Time Cards and Reports 7 years

 

FOR INDIVIDUALS
DOCUMENT            RETENTION PERIOD
Alimony, Custody, Prenuptial Agreements Permanently
Bank Statements 3 years
Birth and Death Certificates Permanently
Canceled Checks 3 years
Certificates of Deposit Statements 7 years
Charitable Contributions Keep with tax return
Employee Business Expense Reports Keep with tax return
Forms 1099 Received 7 years
Forms W2 Received Permanently
House Records (mortgage and repairs) Permanently
Income Tax Return Record Permanently
Insurance Policies Keep until expiration
List of Financial Assets Permanently
Major Purchase Receipts 7 years
Medical Records 7 years
Wills, Trusts Permanently

 

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