Record Retention Tips

by: Smith and Howard

May 21, 2020

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Like so many of us, you probably have a filing cabinet full of papers from years past or files in your computer that you have been saving “just in case” you need them some day. While there are some records that are important and do need to be kept permanently, that is a relatively short list. To help you retain important documents and eliminate those that aren’t needed, we’ve gathered a handy list of what you need to keep, and for how long. With so many things stored in “the cloud” these days, it is necessary to have printed copies of important documents in case you temporarily lose access to online items. It is also equally important to protect yourself and your personal information or that of your employees/clients by shredding or safely and permanently deleting documents that have a shelf-life.

For Individuals

Charitable contribution documentationSeven years
Credit card statementsSeven years
Divorce documentsPermanent
Estate planning documentsPermanent
Home improvement receiptsDuring ownership plus another seven years
Home purchase documentsDuring ownership plus another seven years
Income tax returns and all supporting documentsSeven years
Insurance policiesFor the life of the policy plus another three years
Loan documentsFor the life of the policy plus another seven years
Retirement plan annual reportsPermanent

For Businesses

The IRS has provided the following time limitations for income tax returns:

  1. Keep records for three years if situations (4) and (5) below do not apply to you.
  2. Keep records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
  3. Keep records for seven years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. Keep records for six years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
  5. Keep records indefinitely if you do not file a return.
  6. Keep employment tax records for at least four years after the date that the tax becomes due or is paid, whichever is later.

The IRS recommends keeping records relating to property until the period of limitations expires for the year in which you dispose of the property. You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.

If you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property.

Accounting records

Accounts payableSeven years
Accounts receivableSeven years
Audit reportsPermanent
Chart of accountsPermanent
Depreciation schedulesPermanent
Expense recordsSeven years
Financial statements (annual)Permanent
Fixed asset purchasesPermanent
General ledgerPermanent
Inventory recordsSeven years (permanent for LIFO system)
Loan payment schedulesSeven years
Purchase ordersSeven years
Sales recordsSeven years
Tax returnsPermanent

Bank Records

Bank reconciliationsTwo years
Bank statementsTwo years
Cancelled checksSeven years (permanent for real estate)
Electronic payment recordsSeven years

Corporate Records

Articles of incorporationPermanent
Bank statementsPermanent
Board minutesPermanent
Business licensesPermanent
Bylaws Permanent
Contracts – majorPermanent
Contracts – minorLife of contract plus four years
Insurance policiesLife of policy plus three years (check with insurance agent)
Labor contractsPermanent

Employee Records

Accident reportsSeven years
Benefit plansPermanent
Employment applicationsThree years
Employee files (ex-employees)Seven years (or state statute of limitations for employee lawsuits)
Employee taxesSeven years
Payroll recordsSeven years
Worker Compensation Reports10 years

Real Property Records

Construction records Permanent
Equipment LeasesFive years
Leases payment recordsLife of lease plus four years
Real estate purchasesPermanent

Please note that this is by no means an all-inclusive list, nor is it permanent. Policies and advice change over time, and this is just a general guide.

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