Please note that the following is meant for informational purposes only and does not qualify as legal or professional advice. If you are seeking professional advice, please speak to one of our CPAs.
Whether you are an individual filing a tax return for your one-person shop or a multinational corporation filing an extensive return, you’ve probably heard the adage “keep everything on file.” On a very general level, this simply means that you have a document related to payments or tax-related issues, you should keep a physical copy somewhere. However, this can take up space quickly—so how long, exactly, do you need to keep some of that paperwork?
For a Limited Time Only
Below is a listing of how long you need to keep certain documents.
|Two Years||· Bank Reconciliations
· Employee Timesheets
|Three Years||· Bank Statements
· FMLA Records
· Insurance Policies (incl. expired ones)
· Personnel and Employment Records
|Four Years||· Employment Tax Records|
|Five Years||· Payroll Records|
|Seven Years||· Accounts Payable Ledger and Aging Reports
· Accounts Receivable Ledger and Aging Reports
· Checks (incl. canceled ones) (incl. for certain asset purchases, contracts, and tax payments; these are kept for the life of the asset or the length of the contract plus 3-5 years)
· Inventories of Products, Materials, and Supplies
· Notes Payable Schedules and Ledgers
· Notes Receivable Schedules and Ledgers
· Tax Returns
· Tax Return Source Documents
· Audited Financial Statements
|Variable||· Contracts: Life Plus Four Years
· Lease Payment Receipts: Lease Term Plus Four Years
Keep It Forever
For the following, you should never discard under any circumstances:
- Chart of Accounts
- Deeds and Property Records
- Depreciation Schedules
- Tax Correspondence
- Trademarks and Copyrights Documents
Retention is Protection
Put simply, if you get audited by the IRS and don’t have the supporting documentation, you will lose and likely owe hefty interest payments. Your word, secondary documentation, or copies will never suffice—you must have the original documents listed above if the IRS comes to you. Retention is, simply put, for protection.
Ideally, you can keep these documents in a filing cabinet for ease of access. It is in your best interest to keep these files in a place you can easily access, ideally in your home, your office, or in some other place of business that you operate out of regularly.
If you still have questions, you can speak to one of McAuley & Crandall’s experienced CPAs for further information at 913-239-9130.