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McLan Accounting’s Retention Guide

Whether you are running a business or managing your own finances, you will end up gathering a lot of different documents. This will include paystubs, tax returns, purchase orders, requisitions, deposit slips, and much more. These are all useful when filing your taxes, applying for loans, and much more. You don’t, however, have to keep these documents indefinitely. This guide will help you to decide how long to keep each type of document.

How Long to Store Tax Records

If you’re like most people, you have a file somewhere with previous year’s tax documents. Many people keep these documents around indefinitely, and would find many years of documentation stored away. While most of the time you’re never going to need these documents again, it is critical that you have them should it be necessary.

Federal law requires that you keep copies of your tax returns, along with any type of supporting documentation, for a minimum of three years. While this is a commonly known rule, it actually isn’t going to be enough time. This is because if the IRS audits you and believes you may have underreported your income by at least 25%, it can go back and look six years. If you didn’t file a tax return (or the IRS doesn’t have records of the returns), they can go back indefinitely.

That being said, however, there are some documents that aren’t going to be needed, or that can be recovered very easily so you don’t need to keep them a long time. Getting rid of unnecessary documents will help to keep your home or business from becoming cluttered.

Documents to Keep One Year

The following documents should be kept one year after you have filed your taxes that use them. These are business documents:

• Correspondence with Customers and Vendors
• Any Duplicates of Deposit Slips
• Most Purchase Orders
• Documents from Receiving Sheets
• Requisition Documentation
• Stenographer’s Notes
• Withdrawal Forms from Stockrooms

Documents to Keep for Three Years

These documents should be kept for three years in order to ensure you have them should there be an audit or other need.

• Personnel Records for Employees (Three Years After Termination of Employment)
• Employment Applications
• Insurance Policies that have Expired
• Reports from Internal Audits
• All Internal Reports
• Vouchers for Petty Cash
• Physical Tags from Inventory
• Time Cards for All Hourly Employees

Documents to Keep for Six Years

The following documents may be needed in the future for audits, lawsuits, and other uses. Keeping them for six years should help ensure you have them if they are needed.

• Claims from Accident Reports
• All Accounts Payable Schedules and Ledgers
• All Accounts Receivable Schedules and Ledgers
• All Bank Statements
• Copies of Cancelled Checks
• All Stock or Bond Certificates
• Tax Records for All Employees
• Expense Distribution Schedules
• Expired Contracts
• Expired Option Records
• Inventory Records of Products, Supplies, and Materials
• Copies of Invoices that are Sent to Customers
• Documents on Plant Costs
• Sales Records • Time Books
• Vouchers for Payments Made to Vendors
• Vouchers for Payments Made to Employees

Documents to Keep Forever

Finally, there are some documents that you’ll be smart to just keep forever. While you won’t typically need them, it is better to have them available should they be necessary:

• Audit Reports from Your CPA or Accountant
• All Cancelled Checks for Critical Payments
• Charts of Accounts
• Cash Books
• Corporate Documents
• Deeds
• Depreciation Schedules
• Year End Financial Statements
• General Ledgers with Year End Balances
• Accident Report Claims
• IRS Revenue Agent Reports
• Investment Trade Confirmations
• Legal Records
• Minutes from the Director’s Meetings
• Mortgages Documents
• Retirement and Pension Records
• Tax Returns
• Registrations for Trademarks or Patents

Personal Documents to Keep

You’re also going to want to keep many types of personal documents to ensure you have them should they be needed. You should keep your monthly and quarterly statements from mutual funds or IRA investments for one year. Credit card statements, medical bills, utility records, and expired insurance records should be kept for a period of three years. Any supporting documents for tax returns, accident reports and/or claims, tax-related medical bills, wage garnishments, and any other tax documents should be kept for six years.

There are also some documents that should be kept forever, including CPA audit records, legal records, annual tax returns, any tax payment checks, property records for property you still own, investment trade confirmations, and all annual records related to your retirement or pension accounts. You should keep records related to your vehicle as long as you own the car, but you may then dispose of the records a year after your vehicle has been sold.

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