Record Retention Guide

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Personal Records To Keep ➤➤

special circumstances ➤➤

Business Records To Keep ➤➤

Caution ➤➤

 

 

Storing Your Tax Records: How long is long enough? 

Federal tax law requires taxpayers to maintain copies of tax returns and supporting documents for three years. This is commonly referred to as the "three-year law." Unfortunately, this misinterpretation leads many taxpayers to believe they are safe provided they retain their documents for this period of time.

However, if the IRS believes you have significantly under-reported your income (by 25 percent or more), or believes there may be indication of fraud, the IRS has the right to go back and look into your records for up to six years in an audit. To be safe in all circumstances and avoid any misleading advertisements on retention guides, use the following guidelines set out below:  

Create a Backup Set of Records and Store Them Electronically. 

Keeping a backup set of records -- including, for example, bank statements, tax returns, insurance policies, etc. -- is easier than ever now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet.

Even if the original records are provided only on paper, they can be scanned and converted to a digital format. Once the documents are in electronic form, taxpayers can download them to a backup storage device, such as an external hard drive, or burn them onto a CD or DVD (don't forget to label it).

You might also consider online backup, which is the only way to ensure that data is fully protected. With online backup, files are stored in another region of the country, so that if a hurricane or other natural disaster occurs, documents remain safe.

 

Personal Records to Keep: 

1 year: 

  • Bank Statements
  • Paycheck Stubs (reconcile with W-2)
  • Canceled checks
  • Monthly and quarterly mutual fund and retirement contribution statements (reconcile with year end statement)

3 years: 

  • Credit Card Statements
  • Medical Bills (in case of insurance disputes) 
  • Utility Records
  • Expired Insurance Policies

6 years: 

  • 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

Keep Forever: 

Although the federal law does not require you to keep your tax records "forever," in many cases there will be other reasons you'll want to retain the following documents indefinitely.

  • CPA Audit Reports
  • Legal Records
  • Important Correspondence
  • Income Tax Returns
  • Income Tax Payment Checks
  • Investment Trade Confirmations
  • Retirement and Pension Records

Special Circumstances: 

  • Car Records (retain until the vehicle is sold)
  • Credit Card Receipts (keep with your credit card 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)

Business Records to Keep: 

1 year: 

  • Correspondence with Customers and Vendors
  • Duplicate Deposit Slips
  • Purchase Orders (other than Purchasing Department copy)
  • Receiving Sheets & Requisitions
  • Stenographer's Notebooks
  • Stockroom Withdrawal Forms

3 years: 

  • 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

6 years: 

  • Accident Reports, Claims
  • Accounts Payable Ledgers and Schedules
  • Accounts Receivable Ledgers and Schedules
  • Bank Statements and Reconciliations
  • 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 (pension payments)
  • 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, Schedules

Keep Forever: 

Although federal law does not require you to keep tax records "forever," there will be other reasons you'll want to retain the following 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, by-laws)
  • Documents substantiating fixed asset additions
  • Deeds, Mortgages, Bills of Sale (Property Records)
  • Depreciation Schedules
  • Financial Statements (Year End)
  • General/Private Ledgers, Year End Trial Balances
  • Insurance Records (Reports, Claims, Policies)
  • Investment Trade Confirmations
  • IRS Revenue Agents' Reports
  • Legal Records and Correspondence 
  • Minute Books of Directors and Stockholders
  • Property Appraisals by Outside Appraisers
  • Retirement and Pension Records
  • Tax Returns and Worksheets
  • Trademark and Patent Registrations

Caution: Identity theft is a serious threat in today's world, and it is important to take every precaution to avoid it. After it is no longer necessary to retain your tax records, financial statements, or any other documents with your personal information, you should dispose of these records by shredding them and not disposing of them by merely throwing them away in the trash.