Are you wondering what to do with all those tax documents and records you have piling up around your office or in your computer files? Are you thinking about wiping them from your company’s hard drive or sending them to the shredder? Not so fast. The IRS has several rules when it comes to how long your business should keep its records. Make sure you are up to date on the current records retention schedule before you permanently delete something important.
Generally speaking, records that support your income or deduction claims for tax return purposes should be kept until the period of limitations for a particular tax return expires. The “period of limitations” is defined as the period of time the IRS gives you to change information on your return, particularly when the information relates to a refund or credit you have claimed. Also, just because you aren’t planning to make any changes to your tax return doesn’t mean the IRS won’t. Therefore it’s in your best interest to keep your documents until the IRS can no longer assess additional taxes or request additional information from you.
Below is a quick reference guide pertaining to some common records your office has been collecting over the years and how long you should keep them.
Records You Should Keep Permanently:
- Copyright registration
- Correspondence (legal and important matters)
- Deeds, mortgages, bills of sale
- Depreciation schedules
- Financial statements (end-of-year)
- General and private ledgers (and end-of-year trial balances)
- Insurance records, current accident reports, claims, policies, etc.
- Minute books for director and stockholder (including bylaws and charter)
- Property appraisals by outside appraisers
- Retirement and pension records
- Tax returns and worksheets, revenue agent’s reports and other documents relating to determination of income tax, sales tax, or payroll tax liability
Records That Should Be Retained For At Least Seven Years:
- Accident reports and claims (settled cases)
- Accounts payable/receivable ledgers and schedules
- Expense analyses and expense distribution schedules
- Inventories of products, materials and supplies
- Plant cost ledgers
- Telephone logs/message books
- Time books/cards
- Withholding tax statements
- Employee payroll records (W-2, W-4, annual earnings, etc.)
Records That Can Be Destroyed After Three Years:
- Bank deposit slips
- Employment records
- General correspondence
- Internal work orders
- Production and sales reports
- Sales commission reports
If the records you are looking for aren’t listed above, you can find additional record retention recommendations in our current record retention schedule.
IMPORTANT: The actual amount of time you are required to keep a specific document may be longer depending on your business or what is contained in the document. If you have questions about specific documents or would like some advice on your current record retention practices, email Rea & Associates.
Author: Joe Popp, JD, LLM (Dublin office)