Article provides recommendations for retention of business records. How long you should keep business documents and records.
 

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Record Retention Table

QuickBooks software training, support, and problem solving
Strategies and information for a total small business solution
Accounting  ●  Tax  ●  Bookkeeping  ●  Office procedures

Recommended length of time to keep books and records

The IRS says you must keep your records as long as they may be needed to prove the income or deductions on a tax return. For example, determining gain or loss on a sale or disposal of an asset, you will need to substantiate the cost, so records and receipts related to that asset must be kept as long as asset is still in service and then add 3 years.  The  IRS says the length of time to retain business documents varies depending on how honest and how accurate your tax returns have been.  If you file a fraudulent return, you must keep records indefinitely..

Reality is that destroying business records too soon or keeping business records them too long  (subpoenaed and introduced in evidence to support the claims of adversaries) has cost organizations millions of dollars in penalties, lost lawsuits, and created storage problems.  The following record retention table is  based more on business status quo rather than on authority, so use your best judgment and consult with your CPA and put together a schedule for keeping records and retaining business documents for your employees to follow..

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More and more businesses are going paperless. The savings in personnel time can be significant.
 If this has been on your wish list, contact us at 800-216-0763.  We sell paperless systems for the PC (software and high speed scanner for electronic storage media)  that integrates with QuickBooks and other accounting software packages and indexes your files for fast search and easy retrieval. If you are going paperless it is important
to stay in compliance with IRS bookkeeping and recordkeeping requirements.

Be sure to implement paperless document procedures and utilize software that will

  • will ensure an accurate and complete transfer of the hardcopy original document with a high degree of legibility and readability when displayed on a monitor and when reproduced in hardcopy
  • the  electronic storage media must index, store, preserve, retrieve, and reproduce documents
  • provide reasonable controls to ensure the integrity, accuracy, and reliability of the electronic storage media
  • provide reasonable controls to prevent and detect the unauthorized creation of, addition to, alteration of, deletion of, or deterioration of electronically stored books and records
  • create and adhere to an inspection and quality assurance program evidenced by regular evaluations of the electronic storage system including periodic check of electronically stored books and records.
  • The information maintained must be cross-referenced to and  provide support for the taxpayers books and records
  • The procedures relating to the use of the electronic storage system must be in writing and resources (personnel, software/hardware)  must be made available to the IRS for locating, retrieving, and reproducing the books and records. It must not be subject to any agreement that would limit or restrict the IRS access to and use of the Electronic Service System

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Retention Record Schedule

As you will see under authority, most decisions for retention of documents are left up to the managers.

TYPE OF RECORD

RETENTION

AUTHORITY

ACCOUNTING & FISCAL

PERIOD YEARS

Accounts Payable Invoices

3

STATE

Accounts Payable Ledger

Permanently

Administrative Decision

Accounts Receivable Invoices & Ledgers

5

Administrative Decision

Balance Sheets

Permanently

Administrative Decision

Bank Deposits

3

Administrative Decision

Bank Statements

3

Administrative Decision

Capital Asset Record

3 after sale

Administrative Decision

Cash Receipt Records

7

Administrative Decision

Check Register

Permanently

Administrative Decision

Checks, Dividend

6

Checks, Payroll

2

 STATE

Checks, cancelled

3

 STATE

Cost Accounting Records

5

Administrative Decision

Earnings Register

3

 STATE

Entertainment Gifts & Gratuities

3

Administrative Decision

Expense Reports

3

Administrative Decision

Financial Statements, Certified

Permanently

Administrative Decision

Financial Statements, Periodic

2

Administrative Decision

General Ledger Records

Permanently

Code of Federal Regulations

Labor Cost Records

3

Code of Federal Regulations

Note Register

Permanently

Administrative Decision

TYPE OF RECORD

RETENTION

AUTHORITY

PERIOD YEARS

Payroll Registers

3

 STATE

Petty Cash Receipts

3

Administrative Decision

P & L Statements

Permanently

Administrative Decision

Salesman Commission Reports

3

Administrative Decision

Travel Expense Reports

2

Administrative Decision

Work Papers, Rough

2

Administrative Decision

ADMINISTRATIVE RECORDS

Audit Reports

10

Administrative Decision

Classified Documents: Inventories,

Reports, Receipts

10

Administrative Decision

CORPORATE

Annual Reports

Permanently

Administrative Decision

Authority to Issue Securities

Permanently

Administrative Decision

Bonds, Surety

3

Administrative Decision

Capital Stock Ledger

Permanently

Administrative Decision

Charters, Constitutions, Bylaws

Permanently

Administrative Decision

Contracts

Permanently

Administrative Decision

Corporate Election Records

Permanently

Administrative Decision

Incorporation Records

Permanently

Administrative Decision

Stock Transfer & Stockholder

Permanently

Administrative Decision

Insurance Policies

Permanently

Administrative Decision

Patents & Related Material

Permanently

Administrative Decision

Trademark & Copyrights

Permanently

Administrative Decision>

PERSONNEL

Accident Reports, Injury Claims, Settlements

30

 STATE

Applications, Changes & Terminations

5

Code of Federal Regulations

Attendance Records

7

Administrative Decision

Employee Contracts

6

Administrative Decision

Fidelity Bonds

3

Administrative Decision

Garnishments

5

Administrative Decision

Health & Safety Bulletins

Permanently

Administrative Decision

Injury Frequency Charts

Permanently

Code of Federal Regulations

Insurance Records, Employees

11

INS

Job Descriptions

2

Code of Federal Regulations

Rating Cards

2

Code of Federal Regulations

Time Cards

2

Code of Federal Regulations

PLANT & PROPERTY RECORDS

Depreciation Schedules

Permanently

Administrative Decision

Inventory Records

Permanently

Administrative Decision

Maintenance & Repair, Building

10

Administrative Decision

Maintenance & Repair, Machinery

5

Administrative Decision

Plant Account Cards, Equipment

Permanently

Code of Federal Regulations

Property Deeds

Permanently

Administrative Decision

Purchase or Lease Records of Plant Facility

Permanently

Administrative Decision

TYPE OF RECORD

RETENTION

AUTHORITY

TAXATION

Annuity or Deferred Payment Plan

Permanently

Code of Federal Regulations

Depreciation Schedules

Permanently

Code of Federal Regulations

Dividend Register

Permanently

Code of Federal Regulations

Employee Withholding

4

Code of Federal Regulations

Excise Exemption Certificates

4

Code of Federal Regulations

Excise Reports (Manufacturing)

4

Code of Federal Regulations

Excise Reports (Retail)

4

Code of Federal Regulations

Inventory Reports

Permanently

Code of Federal Regulations

Tax Bills & Statements

Permanently

Administrative Decision

Tax Returns

Permanently

Administrative Decision

Sales Tax Returns Permanently Administrative Decision
Payroll Tax Returns 7 Years Administrative Decision
Pension Returns Permanently Administrative Decision

In a nutshell, to be conservative keep documents a minimum of 7 years if the document supports
a deduction on your tax return. If the outlay or deposit of cash resulted from acquiring or selling an asset, keep the documentation for 7 years after the sale of the asset. Keep tax returns permanently (except payroll returns may be discarded after 7 years after the expense was reported).  Keep all personnel records as per schedule above and keep year end financials and general ledger and year end inventory reports permanently.

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IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that, any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication