Record Retention Guide

Record Retention Guide

Wondering how long you need to keep tax records and other documents? Federal law requires that you keep copies of tax returns and supporting materials for three years; however, the IRS can demand up to six years of records in the event of an audit. To ensure you have any necessary information to cover your risk, but to avoid piling up more papers in storage than you need, follow the retention guidelines below. This information is provided as a general guide for how long you should retain your personal income tax records.

It is always advisable to have both a paper copy and electronic backup, preferably stored offsite or on a different device from your main computer network in the event of a natural disaster or business disruption. Any documents containing financial or personal information should be shredded prior to discarding or recycling.

Guidelines by Document Type

ACTUAL TAX RETURNS: Keep indefinitely.

SUPPORTING RECORDS FOR TAX RETURNS: Keep for 5 years. Your tax returns can be audited within 3 years of filing for federal and 4 years from filing for state. This includes bank statements, 1099 forms and general receipts or charges.

RECORDS RELATING TO PROPERTY AND DEPRECIABLE ASSETS: Keep in mind that the tax consequences of a transaction that occurs in one year may depend on things that happened in earlier years, and that the period for which you should retain records must be measured from the year in which the tax consequences actually occur. EXAMPLE: Suppose you bought your home in 2000, and made improvements in 2002. You then sell your home in 2009. In order to determine the tax consequences of the sale, it’s necessary to know your basis, which depends on earlier transactions. If your 2009 return is audited, you may have to produce records relating to the purchase in 2000 and the improvements in 2002 to substantiate your basis. Therefore, such records should be kept for 5 to 6 years after the 2009 return has been filed.

DIVORCE AND SEPARATION: Be sure you have access to any tax records affecting you that are kept by your spouse. It is normally easier to keep a set of copies.

These should include:

  • Divorce or agreement of separate maintenance
  • Joint tax returns and supporting records
  • Agreements or decrees over custody of children and agreements of who should claim an exemption for them
  • Records supporting cost of all jointly owned property
  • Records supporting cost or other basis of all property transferred to you during your marriage or as a result of the divorce

LOST OR DESTROYED RECORDS: It is a good practice to keep original records in a safety deposit box or other safe place outside your home and to maintain copies of those records in your home for easy access. If prior tax returns are lost, you may be able to get copies of these from your prior tax preparer. If we prepared your tax returns, we maintain copies of those tax returns during the period you are our client and for three years after you cease to be a client. For lost securities, your stockbroker may be able to provide you with the related tax information. For lost records on real property, your attorney may be able to provide you with missing information if he/she assisted in the transaction.

Keep For 1 Year

Business Documents:

  • Correspondence with Customers and Vendors
  • Duplicate Deposit Slips
  • Purchase Orders (other than Purchasing Department copy)
  • Receiving Sheets
  • Requisitions
  • Stenographer’s Notebooks
  • Stockroom Withdrawal Forms

Personal Documents:

  • Bank Statements
  • Paycheck Stubs (reconcile with W-2)
  • Canceled checks
  • Monthly and quarterly mutual fund and retirement contribution statements (reconcile with year end statement)

Keep For 3 Years

Business Documents:

  • Employee Personnel Records (after termination)
  • Employment Applications
  • Expired Insurance Policies
  • General Correspondence
  • Internal Audit Reports
  • Internal Reports
  • Petty Cash Vouchers
  • Physical Inventory Tags
  • Savings Bond Registration Records of Employees
  • Time Cards For Hourly Employees

Personal Documents:

  • Credit Card Statements
  • Medical Bills (in case of insurance disputes)
  • Utility Records
  • Expired Insurance Policies

Keep For 6 Years

Business Documents:

  • Accident Reports, Claims
  • Accounts Payable Ledgers and Schedules
  • Accounts Receivable Ledgers and Schedules
  • Bank Statements and Reconciliations
  • Cancelled Checks
  • Cancelled Stock and Bond Certificates
  • Employment Tax Records
  • Expense Analysis and Expense Distribution Schedules
  • Expired Contracts, Leases
  • Expired Option Records
  • Inventories of Products, Materials, Supplies
  • Invoices to Customers
  • Notes Receivable Ledgers, Schedules
  • Payroll Records and Summaries, including payment to pensioners
  • Plant Cost Ledgers
  • Purchasing Department Copies of Purchase Orders
  • Sales Records
  • Subsidiary Ledgers
  • Time Books
  • Travel and Entertainment Records
  • Vouchers for Payments to Vendors, Employees, etc.
  • Voucher Register, Schedules

Personal Documents:

  • Supporting Documents For Tax Returns
  • Accident Reports and Claims
  • Medical Bills (if tax-related)
  • Property Records / Improvement Receipts
  • Sales Receipts
  • Wage Garnishments
  • Other Tax-Related Bills

Keep Forever

Business Documents:

  • Audit Reports from CPAs/Accountants
  • Cancelled Checks for Important Payments (especially tax payments)
  • Cash Books, Charts of Accounts
  • Contracts, Leases Currently in Effect
  • Corporate Documents (incorporation, charter, by-laws, etc.)
  • Documents substantiating fixed asset additions
  • Deeds
  • Depreciation Schedules
  • Financial Statements (Year End)
  • General and Private Ledgers, Year End Trial Balances
  • Insurance Records, Current Accident Reports, Claims, Policies
  • Investment Trade Confirmations
  • IRS Revenue Agents’ Reports
  • Journals
  • Legal Records, Correspondence and Other Important Matters
  • Minute Books of Directors and Stockholders
  • Mortgages, Bills of Sale
  • Property Appraisals by Outside Appraisers
  • Property Records
  • Retirement and Pension Records
  • Tax Returns and Worksheets
  • Trademark and Patent Registrations

Personal Documents:

  • CPA Audit Reports
  • Legal Records
  • Important Correspondence
  • Income Tax Returns
  • Income Tax Payment Checks
  • Investment Trade Confirmations
  • Retirement and Pension Records

Special Circumstances

  • Car Records (keep until the car is sold)
  • Credit Card Receipts (keep with your credit card statement)
  • Insurance Policies (keep for the life of the policy)
  • Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
  • Pay Stubs (keep until reconciled with your W-2)
  • Property Records / improvement receipts (keep until property sold)
  • Sales Receipts (keep for life of the warranty)
  • Stock and Bond Records (keep for 6 years beyond selling)
  • Warranties and Instructions (keep for the life of the product)
  • Other Bills (keep until payment is verified on the next bill)
  • Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)