Records Retention Guidelines for Businesses, Individuals & Accounting Firms

Following are charts devised for individuals, businesses, and accounting firms. These charts may be used as a guideline for most record retention; however, always be sure to check federal, local and state record retention requirements. Detail on many on many aspects of record retention, including tax records, can found in Guide to Record Retention Requirements in the Code of Federal Regulations, a publication available from the Superintendent of Documents or from Commerce Clearing House.

Items
Rentention Period
Accident reports and claims (settled cases)
7 yrs
Accounts payable ledgers and schedules
7 yrs
Audit reports of accountants
Permanently
Bank reconciliations
1 yr.
Capital stock and bond records
Permanently
Cash books
Permanently
Chart of accounts
Permanently
Checks (cancelled, but see exception below)
7 yrs
Checks (cancelled, for important payments, i.e. taxes, purchases of property, special contracts, etc.(checks should be filed with the papers pertaining to the underlying transaction)
Permanently
Contracts and leases (expired)
7 yrs
Contracts and leases still in effect
Permanently
Correspondence general
3 yrs.
Correspondence (legal and important matters only)
Permanently
Deeds, mortgages, and bills of sale
Permanently
Duplicate deposit slips
1 yr.
Employee personnel records (after termination)
3 yrs.
Employment applications
3 yrs.
Expense analyses and Expense distribution schedules
7 yrs
Financial statements (end-of-year trial balances)
Permanently
General Ledgers (end-of-year trial balances)
Permanently
Insurance policies (expired)
3 yrs.
Insurance records, current accident reports, claims, policies, etc
Permanently
Inventories of products, materials, and supplies
7 yrs
Invoices to customers
7 yrs
Invoices from vendors
7 yrs
Journals
Permanently
Minute books of directors and stockholders, including bylaws and charter
Permanently
Notes receivable ledgers and schedules
7 yrs
Payroll records and summaries
7 yrs
Petty cash vouchers
3 yrs.
Physical inventory tags
7 yrs
Plant cost ledgers
Permanently
Property appraisals by outside appraisers
Permanently
Property records-including costs, depreciation reserves, depreciation schedules, blueprints and plans
7 yrs
Purchase orders
1 yr.
Receiving sheets
1 yr.
Requisitions
7 yrs
Sales records
3 yrs.
Savings bond registration records of employees
7 yrs
Stock and bond certificate (cancelled)
1 yr
Stockroom withdrawal forms
7 yrs
Subsidiary ledgers
7 yrs
Tax returns and worksheets, revenue agents’ reports and other documents
Permanently
Time books
7 yrs
Voucher register and schedules
7 yrs
Voucher for payments to vendors, employees, etc. (includes all allowances and reimbursement of employees, officers)
7 yrs

IRS Practice and Procedure

Sales and receivables

Sales journals
7 yrs.
Shipping tickets
3 yrs.
Accounts receivable ledgers and trial balances
7 yrs.
Invoices
7 yrs.
Uncollectable accounts and write offs
7 yrs.
Expired contracts and notes receivable
7 yrs.

Purchases and payables

Purchase journals
7 yrs.
Bills of lading
3 yrs.
Accounts payable ledgers and trial balances
7 yrs.
Purchase orders
3 yrs.
Paid bills and vouchers
7 yrs.
Expired purchase contracts
7 yrs.

Payroll

Payroll journals
7 yrs.
Time cards
7 yrs.
Payroll reports (federal & state)
7 yrs.
Assignments & garnishments
3 yrs.
Forms W-4
7 yrs.

Accounting Firms

Tax files
In office
In Storage
Present clients
3 yrs.
Permanent
Former clients
3 yrs
7 yrs.
Workpaper files
In office
In Storage
Auditor’s reports, compiled or reviewed reports
Present clients
Permanent
Former clients
3 yrs
7 yrs
Correspondence files
3 yrs
7 yrs

IRS Practice and Procedure

Individual Records
Retention Period
Tax return copies
6 yrs. after filing
Medical bills
6 yrs. after payment
Forms 1099 received
6 yrs. after receipt
Keogh statements
6 yrs. after Keogh termination
IRA records (deductible & nondeductible)
6 yrs. after IRA terminatio
Loan records
6 yrs. after loan payoff
Insurance policies
6 yrs. after expiration
Major purchase receipts
6 yrs. after purchase
Year-end brokerage statements
6 yrs. after securities deposit
Certificates of deposit statements
6 yrs. after maturity
Schedule K-1’s from partnerships or S corporations
6 yrs. after disposition of interest
House records (cancelled checks for purchase, major improvements and maintenance)
Permanent
Birth and death certificates
Permanent
Medical records
Permanent
Wills
Permanent
Forms W-2 received
Permanent
Trust agreements
Permanent
Detailed list of financial assets held
Permanent
Alimony, custody of Prenuptial agreements
Permanent
Military papers
Permanent
Photos or videotape of valuables
Permanent

Note: Documents establishing basis of trade, business or investment assets, or taxpayer’s principal residence should be retained for six years beyond the date of the filing of the tax return for the year in which the asset was disposed.

Business Records

General and financial

Capital stock records
Permanent
Corporate records and minutes
Permanent
Property titles and mortgages
Permanent
Federal, state and local tax returns
Permanent
Fixed asset records and appraisals
Permanent
Accountant’s audit reports
Permanent
Interim and year-end financial statements and trial balances
Permanent
Monthly trial balances
Permanent

Cash

Cash receipts and disbursements
7 yrs.
Bank statements, cancelled checks, and deposit slips
7 yrs.
Bank reconciliations
7 yrs.
Petty cash vouchers
7 yrs.

 

Some Considerations

The information above is intended as general record retention guidelines. Specific industries and states have their own nuances that will affect best practices, so you must keep those in mind. In addition, other laws may have an indirect impact on how long you hold on to certain documents. These factors will all affect how you manage your documents and what form document imaging and conversion might take.

Industry and Location

The period of time you need to keep certain records depends on the industry you work in as well as the state in which you operate. To get a better idea of how these may affect your document management needs, let’s look at a couple examples:

Document Management For The Healthcare Industry

In the healthcare industry, patient records need to be kept well preserved, though the period of time for keeping them will vary. In each state, there are certain requirements on how long medical records need to be retained. The state in which you live will determine how long you need to make these records accessible to patients as well as the time during which they need to be kept secure.

Document Management For Public School Systems

If you work in a public school, the length of time during which you’ll have to keep records depends on the type of document and your school district’s/state’s regulations. A student’s IEP, for example, will have to be kept for a certain number of years after it’s active in most schools. Transcripts may be kept for a few years to decades after the student leaves school, after which they may be transferred to a central office. Again, this varies by state and local regulations. Familiarity with the local, state, and federal laws governing your industry is vital to determining specific record retention guidelines.

Taxes

To fulfill tax obligations, you need to keep extraordinarily good records of your financial transactions, including quantities, dates, and the nature of each transaction. The IRS has a certain period of time during which they will audit you, so keep that in mind when establishing specific record retention guidelines for your company. Tax returns and forms should also be kept on record, generally for a period of up to six years after filing. Some other records connected to taxes will need to be kept permanently, however.

Liability

Liability comes in many forms, whether it’s as tax responsibility, security obligations, management policies, or even everyday operations. While you’re unlikely to have problems in every area, virtually anything can happen to create a liability for your company.

Part of minimizing your own liability in these events is maintaining a clear record of everything that goes on as part of your operations. Such documents include accounts, applications, invoices, receipts, other transaction records, payroll, tax returns, W2s, and virtually anything else that records an event in the company. Without good recordkeeping, your company is vulnerable.

Here’s an example:

Suppose one of your clients has a serious complaint about the services rendered. They claim that you were supposed to fix A, B, and C, but that the services were never delivered as promised. Nevertheless, they paid you. After you deny their claims, they press charges and accuse you of fraud.

If you have the right documentation in place for recording each stage of the transaction and services, it can provide some solid evidence that you are innocent of charges. Items such as bills, invoices, and receipts are only part of it. You’ll also want to make sure you keep records of the services themselves as they were rendered, as well as any contracts the client signed with you.

When determining how long such documents need to be kept, it’s important to keep in mind the statute of limitations. Charges can only be made within a certain time frame, each of which depends on the crime committed, so having an idea of what charges can be made within what period of time will give you an idea of how long you need to retain certain records. Also, each state has its own statutes of limitations on various charges, so knowing that information will help as well, especially if you operate in multiple states.

Of course, this is just an example, and while you may not face a scenario like that, it’s always a possibility. Retaining records is vital to the security of your company and minimizing liability.

Impact on Document Management

When it comes to retaining records, there are a number of factors you’ll need to take into consideration in addition to your industry, possible liabilities, and the IRS. It will also have an effect on how much storage space you’ll need to accommodate all those records as well as how that space will be organized and accessed. Certain records may need to be restricted, while others can be generally open to those within your company (or maybe, in some cases, to the public).

Keeping all these documents for several years—or even permanently, as is the case with certain records—creates a massive strain on your company. You need space to keep them all. You need to keep them secure. You want to make sure certain people have access to them while restricting access to others. In addition, they need to be easily retrievable, meaning organization is key. They also need to be cycled out and properly disposed of when you no longer need to keep them, thereby making space for new documents. These all take time and money.

Document imaging, conversion, and indexing services can help cut the burden of this document management nightmare down to a far more manageable level. When scanned, indexed, and stored digitally, they can be made easily searchable as well as easily disposable. Keeping them secure also becomes a more focused, manageable affair. When, under your record retention guidelines, it becomes no longer necessary to hold on to certain documents, it can be easy to sort out old documents from more recent ones, making the record disposal process much efficient.

ILM has the technical skill, experience, and integrity you need to make sure your documents are well organized in a digital format. For questions or concerns, contact us today.