How Long To Store Your Tax and Financial Records

Caution: When you finally decide to destroy your records, it is important to dispose of them by shredding them and not disposing of them by throwing them away.

        How long is long enough to store your records?

        The Simple Answer is 7 years!

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. Be careful: if the IRS believes you have significantly under-reported your income by 25 percent or more, it may go back six years in an audit.

 

To be safe, use the following guidelines. Remember that there is no statute of limitations on fraud.

 

1. Business Documents to Keep – 1 Year

  • Correspondence with Customers and Vendors
  • Copies of Deposit Slips
  • Purchase Orders
  • Receiving Sheets
  • Requisitions

2. Business Documents to Keep – 3 Years

  • Bank Statements and Reconciliations
  • Employee Personnel Records (after termination)
  • Employment Applications
  • Expired Insurance Policies
  • General Correspondence
  • Internal Audit Reports
  • Petty Cash Vouchers
  • Time Cards for Hourly Employees

3. Business Documents To Keep – 6 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 Records
  • Subsidiary Ledgers
  • Time Books
  • Travel and Entertainment Records

4. Recommended records To Keep Permanently

     You are not required  to keep tax records forever, but 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, bylaws, etc.)
  • Documents substantiating fixed asset additions
  • Deeds
  • Depreciation Schedules
  • Financial Statements (Year End)
  • General and Private Ledgers, Year End Trial Balances
  • 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
  • Tax Returns and Worksheets
  • Trademark and Patent Registrations

5. Personal Documents To Keep – 1 year

  • Bank Statements
  • Paycheck Stubs (reconcile with W2)
  • Canceled checks
  • Monthly and Quarterly Mutual Fund and Retirement Contribution Statements (reconcile with year end statement)

6. Personal Documents To Keep – 3 Years

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

7. Personal Documents To Keep – 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

8. Personal Records To Keep Permanently

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

9. 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 W2)
  • 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)

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