The proper length of time to store a document is dependent on the action, expense or event which a document records.
The IRS has established several basic record retention standards for tax records. Lawyers, accountants and government agencies all seem to have different ideas, depending on individual business circumstances, with regards to how long business records should be retained.
Outside of the tax world, there is little guidance on exactly what should be kept and for how long. When it comes to documentation, the conventional approach is “better safe than sorry”.
Business tax returns – three years
The IRS requires companies to keep their business tax returns for at least 3 years from the time of filing. However, complications can arise if your business fails to report income for up to 6 years after filing and up to 7 years if deductions were taken on a bad debt. To be safe, keep your tax returns and all supporting documentation for seven years after filing.
Payroll tax records – four years
If you have employees, the IRS recommends that you keep all employment tax records for at least four years from the time of tax payment or return filing. These records include time sheets, employee information and benefit payments.
Employee records – ten years
In addition to employee tax information, all human resource files for any employee, current or former should be kept. These records include resumes, job applications and descriptions, performance reviews and other employee files.
Keep these documents for at least seven years after an employee leaves or was terminated. In addition, if an employee was injured on the job, you should keep any related records for up to ten years after paying a worker’s compensation.
Financial records – up to seven years
Keep your bank account and credit statements for 7 years. However, if your monthly statements aren’t serving any tax or other business purposes, you can consider shredding them after a year and keeping your detailed annual statements on hand for 7 years.
Ownership records and other key business documents
Company formation documents need to be kept indefinitely. These include articles of incorporation (for corporations) and articles of organization (for LLCs). If you’re a corporation, you’ll also need to keep any director or shareholder meeting minutes and a stock ledger. Other key ownership and business documents including deeds, titles, property records and any contracts should be kept permanently.
Store your business records electronically and access them 24/7 from any device
The IRS has determined that electronic records hold the same legal weight as hard copies. Digital record keeping is simple, safe and eliminates storage costs. Most importantly, storing information online has the added benefit of alleviating tedious manual processes, related to onsite storage, that are prone to error.
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