Record Retention Guide

Federal law requires you to maintain copies of your tax returns and supporting documents for up to three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this minimum period of time. However, if the IRS believes you have significantly underreported your income (by 25% or greater), or believes there may be an indication of fraud, it may go back six years in an audit.

To be safe, use the following guidelines.
 
Create a Backup Set of Records and Store Them Electronically. Keeping a backup set of records (such as tax returns, insurance policies, and bank statements) is easier than ever now than ever.  Most financial institutions can provide statements and documents electronically either by logging into your personal account or requesting an electronic copy. If the original records are only sent to you on physical paper, you can easily scan and converted them to a digital format. Once the documents are in electronic form, taxpayers can download them to a backup storage device, such as an external hard drive, or burn them onto a CD or DVD. Another option to consider is an online backup, which is the only way to ensure that data is fully protected. With online backup, files are stored in the 'cloud' and can be accessed from any place at any time.

Caution: Identity theft is a serious threat in today's world, and it is important to take every precaution to avoid it. After it is no longer necessary to retain your tax records, financial statements, or any other documents with your personal information, you should dispose of these records by shredding them and not disposing of them by merely throwing them away in the trash.

Business Documents To Keep For 1 Year
  • Correspondence with Customers and Vendors
  • Duplicate Deposit Slips
  • Purchase Orders (other than Purchasing Department copy)
  • Receiving Sheets
  • Requisitions
  • Stenographer's Notebooks
  • Stockroom Withdrawal Forms
Business Documents To Keep For 3 Years
  • 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
Business Documents To Keep For 6 Years
  • 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
Business Records To Keep Permanently
While federal guidelines do not require you to keep tax records "forever," in many cases there will be other reasons you'll want to retain these documents indefinitely.
  • 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 To Keep For 1 Year
  • Bank Statements
  • Paycheck Stubs (reconcile with W-2)
  • Canceled checks
  • Monthly and quarterly mutual fund and retirement contribution statements (reconcile with year end statement)
Personal Documents To Keep For 3 Years
  • Credit Card Statements
  • Medical Bills (in case of insurance disputes) 
  • Utility Records
  • Expired Insurance Policies 
Personal Documents To Keep For 6 Years
  • 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
Personal Records To Keep Permanently
  • 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)

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