Record Retention Guide

Monday June 25, 2018

Federal law requires taxpayer’s to maintain copies of tax returns and supporting documents for three years. This is commonly referred to as the “three-year law” and leads many to think they’re safe provided they retain their documents for this period of time.

What many people fail to realize is that 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 during the course of an audit. Please note that while federal guidelines do not require one to keep tax records “forever,” in many cases there will be other reasons you’ll want to retain some documents indefinitely. To be safe, use the following guidelines when deciding which records to keep.

Business Records To Keep…	Personal Records To Keep…
1 Year	1 Year
3 Years	3 Years
6 Years	6 Years
Forever	Forever

 

Business Documents To Keep For One Year

• Correspondence with Customers and Vendors
• Duplicate Deposit Slips
• Receiving Sheets

 

Business Documents To Keep For Three Years

• Employee Personnel Records (after termination)
• Employment Applications
• Expired Insurance Policies
• General Correspondence
• Internal Reports
• Physical Inventory Tags
• Time Cards For Hourly Employees

 

Business Documents To Keep For Six Years

• Accident Reports, Claims
• AP and AR Ledgers and Schedules
• Bank Statements and Reconciliations
• Employment Tax Records
• Expired Contracts, Leases
• Inventories of Products, Materials, Supplies
• Invoices to Customers
• Payroll Records and Summaries
• Travel and Entertainment Records
• Vouchers for Payments to Vendors, Employees, etc.

 

Business Records To Keep Forever

• Audit Reports
• Cancelled Checks for Important Payments (especially tax payments)
• Charts of Accounts and Year-End Financial Statements
• Corporate Documents (incorporation, charter, by-laws, meeting minutes etc.)
• Deeds, Insurance Records, Accident Reports, Claims, Policies
• IRS Revenue Agents’ Reports
• Legal Records, Correspondence and Other Important Matters
• Mortgages, Bills of Sale, Property Appraisals and Property Records
• Tax Returns and Worksheets
• Trademark and Patent Registrations

 

Personal Documents To Keep For One Year

• Bank Statements
• Paycheck Stubs
• Canceled checks

 

Personal Documents To Keep For Three Years

• 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