Record Retention Guide

Record Retention Guide – Business & Personal

Another year has come and gone and another year of tax forms and shoe boxes full of receipts is behind us. But what should be done with those documents created throughout the year?

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. For those of us residing in the State of California the statute of limitation is four years. For the three year federal statute it starts from the extended due date of the tax return whereas the state four year starts from the original due date.

If the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be an indication of fraud, it can go back a total of six years in the case of an audit. So just to be on the safe side, use the following guidelines.

Business Document To Keep For One Year

• Correspondence with Customers and Vendors
• Duplicate Deposit Slips
• Purchase Orders (other than Purchasing Department copy)
• Receiving Sheets
• Requisitions

Business Documents To Keep For Four Years (California Business)

• Bank Statements and Reconciliation’s
• Employee Personnel Records (after termination)
• Employment Applications
• Expired Insurance Policies
• General Correspondence
• Internal Audit Reports
• Internal Reports
• Petty Cash Vouchers
• Physical Inventory Tags
• Savings Bond Registration Records of Employees
• Time Cards For Hourly Employees

Business Documents To Keep For Six Years

• Accident Reports, Claims
• Accounts Payable Ledgers and Schedules
• Accounts Receivable Ledgers and Schedules
• Cancelled Checks
• Cancelled Stock and Bond Certificates
• Employment Tax Records
• 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 & Sales Tax Records
• Subsidiary Ledgers
• Time Books
• Travel and Entertainment Records
• Vouchers for Payments to Vendors, Employees, etc.
• Voucher Register, Schedules
• Company auto usage information

Business Records To Keep Forever (this is critical)

While federal guidelines do not require you to keep tax records “forever,” in many cases there will be other reasons you’ll want to retain these documents indefinitely.

• Audit Reports from CPAs/Accountants
• Cancelled Checks for Important Payments (especially tax payments)
• Cash Books, Charts of Accounts
• Contracts, Leases Currently in Effect
• Corporate Documents (incorporation, charter, by-laws, etc.)
• Documents substantiating fixed asset additions
• Trust Deeds
• Depreciation Schedules
• Internal Financial Statements (Year End)
• Hard Copy of Detailed General Ledger for entire tax year
• 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
• Business Tax Returns and Worksheets
• Trademark and Patent Registrations
• CPA Financial Statements (Audit/Review or Compilation Reports)
• Employee W-2s
Personal Document To Keep For One Year

• 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.

Personal Documents To Keep For Three Years

• Credit Card Statements
• Medical Bills (in case of insurance disputes)
• Utility Records if home office deducted
• Expired Insurance Policies
Personal Documents To Keep For Six Years

• Supporting Documents For Tax Returns
• Bank & Savings account statements
• Check Registers (hand or computerized)
• Loan & mortgage statements
• Accident Reports and Claims
• Medical Bills (if tax-related)
• Sales Receipts
• Other Tax-Related Bills
• Personal Calendar to support business deductions

Personal Records To Keep Forever

• Legal Records
• Important Correspondence
• Personal Income Tax Returns
• Income Tax Payment Checks
• Investment Trade Confirmations
• Retirement and Pension Records
• Home Real Estate Purchase Documentation & improvements

Special Circumstances

• Car Records (keep until the car is sold)
• Credit Card Receipts (keep until verified on your statement)
• Insurance Policies (keep for the life of the policy)
• Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
• Pay Stubs (keep until reconciled with your W-2)
• Property Records / improvement receipts (keep until property sold)
• Sales Receipts (keep for life of the warranty)
• Stock and Bond Records (keep for 6 years beyond selling)
• Warranties and Instructions (keep for the life of the product)
• Other Bills (keep until payment is verified on the next bill)
• Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)