Record Retention Guidelines
Not sure how long to keep those tax and financial records?
When you want to clean out your office after tax season, you may not be sure which records you should keep and which you can discard.
In many cases, the IRS operates by a “three-year law”, which means you should keep important documents for at least three years.
To be on the safe side, we recommend keeping most records for seven years. If the IRS believes you have significantly under-reported your income (by 25% or more), or believes your filings may involve fraud, it can request records as far back as six years in an audit.
Store records in a safe place. If you will be storing your records electronically, make sure you have a secure system for storing them. If you live in an area that is prone to disasters (floodplains for example), you should consider storing records electronically remotely.
Discard records carefully. Identify theft is a fast growing crime. If you will discarding records containing important information (your FEIN, employees social security numbers, bank accounts, etc.), shred the documents. Many local shredding services come to your office to shred a large volume of documents
To be on the safe side, you can use the following as a retention guideline for important business documents.
Common Record Retention Guidelines for Businesses and Nonprofit Organizations
Documents to Keep for One Year
- Purchase Orders (except purchasing department copy)
- Receiving sheets
- Requisitions
- Duplicate Deposit Slips
Documents to Keep for Three Years
- Contractors’ payroll information, from date of completion to contract
- Correspondence with customers or vendors
- Employee Personnel Records (after termination)
- Employment applications, for applicants you do not hire
- Time Cards for Hourly Employees
- Expired Insurance Policies
- Internal Audit Reports
- Petty Cash Vouchers
- Physical inventory documentation
- Documents to Keep for Four Years
- Payroll Registers
- Sick pay, vacation pay, and PTO documentation
Documents to Keep for Five Years
Employee Benefits Records (including life insurance benefits, dental benefits and garnishments)
Documents to Keep for Seven Years
- Accident Reports and Claims for Settled Cases
- Accounts Receivable Aging Reports, Ledgers & Invoices
- Accounts Payable Ledgers and Schedules
- Banks Statements and Reconciliations
- Budgets
- Cash slips, charge slips, expense reports and Petty Cash Records
- Deposit Slips
- Inventories of Products, Materials & Supplies
- Invoices to Customers and Invoices from Vendors
- Notes Receivable Ledgers and Schedules
- Cancelled Checks
- Cancelled Stock and Bond Certificates
- Employment Tax Records
- Payroll Records
- Expired Contracts, Leases
- Expired Option Records
- Sales Records
- Travel Entertainment Records
- Vouchers for Payment to Vendors, Employees, etc.
Business Records to Retain Forever
While the IRS will not require you to keep records “forever”, you may find the following documents useful to retain permanently. For example, if you want to sell your business, an acquiring company may want to see records from the past 10 years. We think it is good idea to keep the following permanently.
- Audit Reports from CPAs/Accountants
- Cancelled Checks for Important Payments (especially tax payments and loan payments)
- Cash Books, Charts of Accounts, Journals
- Contracts, Leases (currently in effect)
- Corporate Documents (incorporation, charter, by-laws, board minutes, etc.)
- Documents related to a substantial fixed asset
- Deeds
- Depreciation Schedules
- Year-end Financial Statements
- General and Private Ledgers, Year End Trial Balances
- Insurance Records (current accident reports, claims, policies)
- Investment Trade Confirmations
- IRS Agents’ Reports
- Mortgages, Bill of Sale
- Property Appraisals by Outside Appraisers
- Property Records
- Retirement & Pension Records
- Tax Returns and Worksheets
- Trademark and Patent Registrations
- Trademark or Patent Infringement Claims
