Record Retention Guidelines

Transcription

1 Record Retention Guidelines for businesses and not-for-profit organizations Bader Martin, P.S. Certified Public Accountants + Business Advisors 1000 Second Avenue, 34 th Floor, Seattle, Washington FAX

2 When it comes to digital and paper records, which documents should you keep and for how long? Unfortunately, it s complicated and definitive rules are rare but a set of guidelines can help you answer the question. Those that follow describe, in general terms, the records you should keep for federal tax purposes. Each state may have its own record retention requirements. And there are non-tax record retention requirements that may differ from the tax requirements for example, an insurance company s requirements to document casualty losses. As a rule, you save the digital and paper records that can protect you during an IRS audit or help you file an amended return for a refund. That period of time is governed by the applicable statute of limitations, which establishes the period during which the IRS can review your records and you can file an amended return. In most cases, the IRS can audit your tax return for three years after the return is filed (or the due date, if later). You can also file an amended return during this time period if you missed a deduction, overlooked a credit, or misreported your income. This means you should retain all of the paperwork that backs up the items on your tax return for at least three years. There are, however, certain exceptions to the three-year rule. The IRS has up to six years to conduct an audit if you understate your income by more than 25 percent of the gross income shown on the return. You have up to seven years to amend your return in order to take deductions for worthless securities. Don t shred any records that would support such deductions. If the IRS alleges that you failed to file a return or your return is fraudulent, there is no statute of limitations. It s generally wise to keep copies of your prior years tax returns forever. Bader Martin 2

3 Retention Period of One Year Purchase orders (except purchasing department copy) Receiving sheets Requisitions Retention Period of Three Years Contractors payroll information, from date of completion of contract Correspondence with customers or vendors Employment applications, for applicants not hired Internal reports (miscellaneous) Physical inventory documentation Tip reporting and tip substantiation documents Retention Period of Four Years Payroll registers Sick pay, vacation pay and PTO documentation Retention Period of Five Years Employee benefits records, including life insurance benefits, dental benefits and garnishments Retention Period of Seven Years Accident reports and claims, for settled cases Accounts receivable aging reports, transaction detail reports and invoices Accounts payable transaction detail reports and schedules Bank statements and reconciliations Budgets Cash slips, charge slips, expense report and petty cash records Deposit slips, bank List of products, materials and supplies Invoices to customers and invoices from vendors Notes receivable transaction detail reports and schedules Personnel records of terminated employees Purchase orders, purchasing department copies Sales records Scrap and salvage records, including those pertaining to inventories and sales Voucher registers and schedules Vouchers for payments to vendors, contractors and employees, including allowances and reimbursements for travel and entertainment expenses of employees and officers Bader Martin 3

4 Retention Period of Ten Years Canceled checks (Note the exception below, for which a permanent retention period applies) Contracts and leases that have expired Insurance policies that have expired Payroll records and summaries, including payments to former employees based on termination date Permanent Retention Period Annual reports Audit reports, internal and external Capital stock and bond records: transaction detail reports, transfer registers, stubs showing issues, record of interest coupons, options Canceled checks for important payments, such as taxes, purchases of property, and special contracts. These checks should be filed with the papers pertaining to the underlying transaction. Charts of accounts Contracts and leases that are still in effect Corporate documents, including articles of incorporation, bylaws and charter, minute books of directors and stockholders, board and committee communications, initial property transfers from incorporators Correspondence relating to legal and important matters Deeds, mortgages, title papers, bills of sale Depreciation schedules Dividend register and canceled dividend checks Financial statements, end-of-year (and, optionally, monthly statements) General and subsidiary transaction detail reports and end-of-year trial balances Insurance records, current accident reports, claims and policies Investments: security and asset acquisition records Journals and journal entries Patent records Partnership agreements Property records including costs, depreciation reserves, end-of-year trial balances, depreciation schedules, blueprints, and plans Stock and bond certificates (canceled) and option agreements Tax returns and worksheets, revenue agents reports, and other documents relating to the determination of your various federal, state and local tax liabilities Trademark registrations W-2 forms Bader Martin 4

5 Bmv Bader Martin, PS CPAs + Business Advisors 1000 Second Avenue 34 th Floor Seattle WA Disclaimer The suggested retention periods in this document are provided as general guidelines only. Record retention requirements are established by a number of regulatory and legal authorities, including Internal Revenue Service regulations, the Sarbanes-Oxley Act, and state and local law. For tax purposes, the retention period generally begins on the date the return was actually filed or due, whichever is later. Although we make every effort to ensure the accuracy of this information, Bader Martin is not responsible for misinterpretations, errors or omissions. Nor are we responsible for its applicability to a specific situation All rights reserved Bader Martin 5