Record Retention
Policy
April 15 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail? What should be your record retention policy? Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the “three-year law” and leads many people to believe they’re safe provided they retain their documents for this period of time.
Storing tax records: How long is long enough?
However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, use the following guidelines.
Business Records To Keep
01 One Year7 items
- Bank Statements and Reconciliations
- Employment Applications
- Expired Insurance Policies
- General Correspondence
- Internal Audit Reports
- Internal Reports
- Petty Cash Vouchers
02 Three Years5 items
- Physical Inventory Tags
- Savings Bond Registration Records of Employees
- Time Cards For Hourly Employees
- Accident Reports, Claims
- Accounts Payable Ledgers and Schedules
03 Six Years23 items
- Accounts Receivable Ledgers and Schedules
- Cancelled Checks
- Cancelled Stock and Bond Certificates
- Employment Tax Records
- Employee Personnel Records (after termination) **
- Expense Analysis and Expense Distribution Schedules
- Expired Contracts, Leases
- Expired Option Records
- Inventories of Products, Materials, Supplies
- Invoices to Customers
- Notes Receivable Ledgers, Schedules
- Payroll Records and Summaries, including payment to pensioners
- Plant Cost Ledgers
- Purchasing Department Copies of Purchase Orders
- Sales Records
- Subsidiary Ledgers
- Time Books
- Travel and Entertainment Records
- Vouchers for Payments to Vendors, Employees, etc.
- Voucher Register, Schedule
- Audit Reports from CPAs/Accountants
- Cancelled Checks for Important Payments (especially tax payments)
- Cash Books, Charts of Accounts
04 Forever19 items
- Contracts, Leases Currently in Effect
- Corporate Documents (incorporation, charter, by-laws, etc.)
- Documents substantiating fixed asset additions
- Deeds
- Depreciation Schedules
- Financial Statements (Year End)
- General and Private Ledgers, Year End Trial Balances
- Insurance Records, Current Accident Reports, Claims, Policies
- Investment Trade Confirmations
- IRS Revenue Agents’ Reports
- Journals
- Legal Records, Correspondence and Other Important Matters
- Minutes Books of Directors and Stockholders
- Mortgages, Bills of Sale
- Property Appraisals by Outside Appraisers
- Property Records
- Retirement and Pension Records
- Tax Returns and Worksheets
- Trademark and Patent Registrations
** Keep terminated employee personnel records for seven years.
Personal Records To Keep
01 One Year1 items
- While it’s important to keep year-end mutual fund and IRA contribution statements forever, you don’t have to save monthly and quarterly statements once the year-end statement has arrived.
02 Three Years4 items
- Credit Card Statements
- Medical Bills (in case of insurance disputes)
- Utility Records
- Expired Insurance Policies
03 Six Years7 items
- Supporting Documents For Tax Returns
- Accident Reports and Claims
- Medical Bills (if tax-related)
- Property Records / Improvement Receipts
- Sales Receipts
- Wage Garnishments
- Other Tax-Related Bills
04 Forever7 items
- CPA Audit Reports
- Legal Records
- Important Correspondence
- Income Tax Returns
- Income Tax Payment Checks
- Investment Trade Confirmations
- Retirement and Pension Records
Special Circumstances
- 01Car Records (keep until the car is sold)
- 02Credit Card Receipts (keep until verified on your statement)
- 03Insurance Policies (keep for the life of the policy)
- 04Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
- 05Pay Stubs (keep until reconciled with your W-2)
- 06Property Records / improvement receipts (keep until property sold)
- 07Sales Receipts (keep for life of the warranty)
- 08Stock and Bond Records (keep for 6 years beyond selling)
- 09Warranties and Instructions (keep for the life of the product)
- 10Other Bills (keep until payment is verified on the next bill)
- 11Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)