Tax Records Retention

Tax record retention times

WHEN IN DOUBT, DON’T THROW IT OUT

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. 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). 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. 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.

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.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, use the following guidelines.

Business Documents To Keep For One 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

Business Documents To Keep For Three 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

Business Documents To Keep For Six 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, including payment to pensioners
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

Special Circumstances

Car Records (keep until the car 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)

Personal Documents To Keep For One 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)

Personal Documents To Keep For Three Years

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

Personal Documents To Keep For Six 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

Personal Records To Keep Forever

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

Business Records To Keep Forever 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
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
Minute 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

How can I check on my tax refunds? Tax Related Web-sites/phone numbers: IRS www.irs.gov IRS Get Refund Status IRS Inquiry Phone: (800) 829-1040

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