Tax Records Retention Guidelines

We are often asked about how long specific records should be kept. Discarding records that should be kept poses a wide range of potential tax and legal problems. Keeping reports too long wastes precious space and resources. But how long should the company’s files be kept? The answer varies depending on company policies and the type of files. Generally, the files should be kept as long as they serve a useful purpose or until all legal and regulatory requirements are met.

Businesses often base how long they keep files on the length of the statute of limitations for breach of contract, breach of fiduciary duty, and professional liability claims. The statues, of course vary with each state.

As to your tax records, the statute of limitations period for income tax returns is generally three years. It is six years if there is a substantial understatement of gross income. A good rule to thumb is to add a year to the statute of limitations period. Using this approach, taxpayers should keep most of their income tax records a minimum of four years, but it may be more prudent to retain them for seven years. Regardless of the tax assessment periods, taxpayers should retain certain records for longer periods, and in some cases, indefinitely. Tax return, results of an audit by a tax authority, general ledgers, and financial statements should normally be kept indefinitely.

Sample record retention periods are included herein. Please note that this table should only be used as a guide. You should consult with your attorney and insurance carrier when establishing a record retention policy. It is also recommended reviewing your record retention policy annually and updating it as necessary considering changes in governmental and professional requirements and the cost of retaining records.

It is also important to note that the IRS permits taxpayers to store certain tax documents electronically. Although these IRS rules are aimed primarily as businesses and sole proprietors, they presumably apply to individuals as well. These rules permit taxpayers to convert paper documents to electronic images and maintain only the electronic files. The paper document can then be destroyed. Certain requirements must be met to take advantage of an electronic storage system.

RECORDS RETENTION GUIDELINES

*7 Years Following Disposition, Termination, or Pay Off

Please note that this table should only be used as a guide. You should consult with your attorney and

insurance carrier when establishing a record retention policy. It is also recommended reviewing your

record retention policy annually and updating it as necessary considering changes in governmental and

professional requirements and the cost of retaining records.

BUSINESS – GENERAL RECORDS RETENTION

TYPE OF RECORD TIME PERIOD TO RETAIN

ACCOUNTING RECORDS

Auditors’ report/Annual financial statements Permanently

Bank statements and deposit slips 7 years

Cancelled checks:

• Fixed assets Permanently

• Taxes (payroll related) 7 years

• Taxes (income) Permanently

• General 7 years

• Payroll 7 years

Cash disbursements Permanently

Cash receipts journal Permanently

Chart of accounts Permanently

Deeds, mortgages, bills of sale Permanently

Electronic payment records 7 years

Employee expenses reports 7 years

Fixed asset record (invoices, cancelled checks, Permanently

Depreciation schedules)

Freight bills and bills of lading 7 years

General journal Permanently

General ledger Permanently

Inventory listings and tags 7 years

Invoices: sales to customers/credit memos 7 years

Patent/trademark and related papers Permanently

Payroll journal 7 years

Production and sales reports 7 years

Purchases 7 years

Purchase journal Permanently

Purchase orders 7 years

Sales or work orders 7 years

Subsidiary ledgers (accounts receivable, 7 years

accounts payable, equipment)

Time cards and daily time reports 7 years

Training manuals Permanently

Trial balance – year end Permanently

RECORDS RETENTION GUIDELINES

*7 Years Following Disposition, Termination, or Pay Off

Please note that this table should only be used as a guide. You should consult with your attorney and

insurance carrier when establishing a record retention policy. It is also recommended reviewing your

record retention policy annually and updating it as necessary considering changes in governmental and

professional requirements and the cost of retaining records.

BUSINESS – GENERAL RECORDS RETENTION

TYPE OF RECORD TIME PERIOD TO RETAIN

EMPLOYEE BENEFIT PLAN RECORDS

Actuarial reports Permanently

Allocation and compliance testing 7 years

Brokerage/Trustee statements supporting 7 years

investments

Financial statements Permanently

General ledger and journals Permanently

Information returns (Form 5500) Permanently

Internal Revenue Service/Department of Labor Permanently

Correspondence

Participant communications related to distribution, 7 years

termination and beneficiaries

Plan and trust agreements Permanently

INSURANCE RECORDS

Accident reports and settled claims 6 years after settlement

Fire inspection and safety reports 7 years

Insurance policies (still in effect) Permanently

Insurance policies (expired) 7 years

LEGAL DOCUMENTS

Articles of Incorporation and Bylaws Permanently

Buy-sell agreements Permanently

Contracts and leases (still in effect) Permanently

Contracts and leases (expired) 7 years

Employment agreements 7 years

Legal correspondence Permanently

Minutes Permanently

Partnership agreements Permanently

Stock certificates and ledgers Permanently

RECORDS RETENTION GUIDELINES

*7 Years Following Disposition, Termination, or Pay Off

Please note that this table should only be used as a guide. You should consult with your attorney and

insurance carrier when establishing a record retention policy. It is also recommended reviewing your

record retention policy annually and updating it as necessary considering changes in governmental and

professional requirements and the cost of retaining records.

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BUSINESS – GENERAL RECORDS RETENTION

TYPE OF RECORD TIME PERIOD TO RETAIN

PERSONNEL RECORDS

Child labor certificates and notices 3 years

Employment application (from date of termination) 2 years

Employment eligibility verification (I-9 Form) 3 years

Help wanted ads and job opening notices 2 years

Personnel files (from date of termination) 4 years

Records of job injuries causing loss of work 5 years

Safety: chemical and toxic exposure records 30 years

Union agreements and individual employee 3 years

contracts (from date of termination)

TAX RECORDS

IRS adjustments Permanently

Payroll tax returns 7 years

Property basis records Permanently

Sales and use tax returns Permanently

Tax return and cancelled checks for tax payments Permanently

RECORDS RETENTION GUIDELINES

*7 Years Following Disposition, Termination, or Pay Off

Please note that this table should only be used as a guide. You should consult with your attorney and

insurance carrier when establishing a record retention policy. It is also recommended reviewing your

record retention policy annually and updating it as necessary considering changes in governmental and

professional requirements and the cost of retaining records.

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INDIVIDUAL – GENERAL RECORDS RETENTION

TYPE OF RECORD TIME PERIOD TO RETAIN

401K /Keogh Statements 7 years *

Alimony, Custody or Prenuptial Agreements Permanently

Annuity Year End Statements 7 years *

Bank Statements 3 years

Birth and Death Certificates Permanently

Cancelled Checks 3 years

Certificates of Deposit Statements 7 years

Charitable Contributions Keep with applicable tax return

Credit Card Purchase Receipts Discard after purchase appears

on credit statement if needed for

warranties, merchandise returns or taxes.

Detailed List of Financial Assets Held Permanently

Employee Business Expense Reports Keep with applicable tax return

Forms 1099 Received 7 years

Forms W2 Received Permanently

House Records (cancelled checks for purchase Permanently

of major improvements and maintenance

Individual Retirement Account Records Permanently

IRA Statements (deductible & non-deductible 7 years to Permanently

Insurance Policies – Life Permanently

Insurance Policies – Other 7 years

Loan Records/Forms 1098 7 years *

Major Purchase Receipts 7 years

Medical Expenses Keep with applicable tax return

Medical Records Permanently

Military Records Permanently

Pay Stubs One year. Discard all but final,

cumulative pay stubs for the year

Photos or Videotape of Valuables Permanently

Real Estate Documents Keep 3-6 years after property has

been disposed of and taxes have

been paid.

Tax return and cancelled checks for tax payments Permanently

Investment/Sales of Stocks & Bonds 7 years