Question: How long should you keep your records?
Answer: As long as you might need them to support inquiries by tax authorities, insurance companies, creditors, or other interested parties.
Federal law requires you to maintain all of your records for at least three (3) full years after the close of a tax year. That time frame extends for any of the following circumstances:
- If you did not report income and it amounts to 25% or more of your gross income, then you need to keep your records for a full six (6) years after the close of the tax year.
- If you filed a claim for a credit or refund or a prior tax year, then you need to keep your records for three (3) years from the date you filed the original return or two (2) years from the date of the amended return, whichever is later.
- If you file a claim for a loss for a worthless security or bad debt deduction, then you need to keep your records for a full seven (7) years.
- If you did not file a return or you filed a fraudulent return, then you need to keep your records indefinitely.
- Finally, you need to keep all employment records for at least four (4) years after taxes become due or are paid, whichever is later.
It’s not enough to keep copies of your tax filings. You need to maintain an orderly file of all of the supporting documentation to justify the numbers you report.
Based on industry best practices, here are our recommendations for record retention:
| Accident reports/claims (settled cases) | 7 years |
| Accounts payable ledgers and schedules | 7 years |
| Accounts receivable ledgers and schedules | 7 years |
| Audit reports | Permanently |
| Bank reconciliations | 3 years |
| Bank statements | 7 years |
| Chart of accounts | Permanently |
| Cancelled checks | |
| • General | • 7 years |
| • Important payments | • Permanently |
| Contracts, mortgages, notes, and leases | |
| • Expired | • 7 years |
| • Still in effect | • Permanently |
| Corporate documents (incorporation, charter, by-laws, etc.) | Permanently |
| Correspondence | |
| • General | • 3 years |
| • Legal and important matters | • Permanently |
| • Routine with customers and/or vendors | • 2 years |
| Deeds, mortgages, and bills of sale | Permanently |
| Depreciation schedules | Permanently |
| Duplicate deposit slips | 3 years |
| Employment applications | 3 years |
| Employment tax records | 7 years |
| Expense analyses/expense distribution schedule | 7 years |
| Financial statements: | |
| • Year-end | • Permanently |
| • Other | • Optional |
| Garnishments | 7 years |
| General ledgers/year-end trial balance | Permanently |
| Insurance policies (expired) | 3 years |
| Insurance records (policies, claims, etc.) | Permanently |
| Internal audit reports | 3 years |
| Internal reports | 3 years |
| Inventories of products, materials, and supplies | 7 years |
| Invoices to customers or from vendors) | 7 years |
| Journals | Permanently |
| Minutes from board and stockholder meetings | Permanently |
| Notes receivable ledgers and schedules | 7 years |
| Payroll records and summaries (including payments to | |
| pensioners) | 7 years |
| Personnel records (terminated) | 7 years |
| Petty cash vouchers | 3 years |
| Physical inventory tags | 3 years |
| Plant cost ledgers | 7 years |
| Property records (including depreciation schedules) | Permanently |
| Purchase orders | |
| • Purchasing department copy | • 7 years |
| • Other copies | • 1 year |
| Receiving sheets | 1 year |
| Retirement and pension records | Permanently |
| Requisitions | 1 year |
| Sales records | 7 years |
| Stenographer’s Notebooks | 1 year |
| Stockroom Withdrawal Forms | 1 year |
| Subsidiary ledgers | 7 years |
| Tax returns and worksheets, examination reports, and | |
| other documents related to determination of income tax liability | Permanently |
| Timesheets | 7 years |
| Trademark registrations and copyrights | Permanently |
| Travel and entertainment records | 7 years |
| Voucher register and schedules | 7 years |
| Withholding tax statements | 7 years |