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How long must I keep the documents and papers in my files. |
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TAX RETURNS: The IRS maintains the right to question
your federal tax return for three years from the date it was
filed, or two years from the date you actually paid the tax,
whichever is later. If the IRS has reason to believe that you
misrepresented your income by 25 percent or more, the agency can
request an audit up to six years later. There is no period of
limitations for fraudulent returns or failure to file a return.
Property records, including receipts for improvements, should also
be kept indefinitely. Both tax and property records are addressed
in IRS Publication 552: Record keeping for Individuals. Small
business owners and managers should review IRS Publication 583:
Starting a Business and Keeping Records. Find out more at the IRS
Web site.
PERMANENT RECORDS: Very important records should be kept
permanently:
- Personal records: birth, death, marriage, divorce, adoption,
custody, proof of naturalization, powers of attorney, military
documents, social security cards, property settlements, etc.
- Tax returns
- Property records: contracts, deeds, mortgages, appraisals,
improvement receipts, etc.
- (If the property is later sold, keep records for at least
five years.)
- Cancelled checks for important purchases and tax deductible
contributions
- Financial statements and reports from accountants or
auditors
- Insurance policies (If an insurance policy is no longer in
force, keep records for at least five years.)
- Investments: ledgers, transfer registers, stock and bond
records, etc.
- (If the asset is later sold, keep summary records to support
tax returns.)
- Corporate charters and by-laws
- Minute books: corporate, board of directors, and
stockholders
- Profit and loss statements
- General ledger records
- Balance sheets
- Fixed asset records and depreciation schedules
- Pension and profit-sharing plans
- Benefit plans
- Personnel records*
- Executive correspondence
- Legal claims and litigation
- Patents, trademarks, and copyrights
*Retention schedules for personnel records are highly variable.
All current personnel records should be kept. Some records (time
cards) may be kept for as little as two or three years; other
information (accident and injury reports) must be kept up to 30
years after settlement.
Periodic Review Required: Other important documents
may not need to be kept permanently, but are still valuable for
either individuals or businesses. These should be maintained on a
long-term basis (five years or more):
- Accounts payable and accounts receivable ledgers
- Bank statements, reconciliations, cancelled checks
- Casualty and theft loss claims
- Expired contracts
- Inventory
- Payroll
- Purchasing, sales, invoices, etc.
- Repair and maintenance for building and machinery
- Research, development, engineering
Short-term Memory Department: Most other records are
active or working papers. Once you have completed writing a
report, the initial drafts can be discarded. In fact, one of the
best ways to clear space in files is to discard duplicate and
extraneous papers. Any unused but valuable statistics or research
can be retained with the final version or placed in a file
designated for such use.
Common sense will tell you what general information (clippings,
reports, seminar notes, etc.) you can purge. A good rule of thumb
is that if you haven't used it within 18 months, toss it.
A few things, however, should be kept short term (6 months to 3
years):
- Bank deposit slips (3-7 years)
- Correspondence with customers, vendors, research sources,
etc. (3-to-7 years)
- Expense reports (3 years, possibly 5-to-7 years)
- Internal audit reports (3 years)
- Petty cash ledgers (3 years)
- Shipping and receiving reports, waybills, etc. (3 years)
As with all records do not discard important information that
cannot be replaced and consider the following:
- Tax returns require
- Proof that deposits are not income
- Proof of the date and amount of income
- Proof of tax deduction for expenditures - such as
amount, date, business purpose, character of expenditure
and other information the tax laws (federal, state,
income, payroll, excise, gift, excise and others)
- Proof of delivery
- Proof of ownership
- Proof of payment or other arrangement on debt
Tips for Maintaining a System
Review as you collect papers. Ask yourself:
- Do I truly need it?
- Is the information current?
- Is it readily available elsewhere, at little or no cost?
- File items where you will look for it (vs. where you would
think to file it)
- Set a regular date to purge files (monthly or quarterly)
- Hold an annual company-wide file holiday where all obsolete
files get purged and recycled
- Archive materials in stackable boxes made for records
retention
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Solutions
are dependent upon facts & circumstances, law and the
objectives. These elements vary from one time to another,
from one circumstance to another and from person or entity to
another.
Bob
Parrish CPA, P.C. can scan your important documents and create
"digital copies". The computer format can be read
by most computer systems and takes much less storage space.
Furthermore, you may find it much easier to locate a computer copy
than to locate the paper copy. In addition, you may find
another service from Bob Parrish CPA, P.C. to be desirable -
maintaining a copy of the computer file(s) at the office of Bob
Parrish CPA, P.C.
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- Help To Keep Your Life In Balance
