Notes From the Back Office

How Long Do You Need To Keep Those Records?

Bookkeepers and accountants are often asked how long specific records should be kept.

Bookkeepers and accountants are often asked how long specific records should be kept. Disposing of records that should be kept can lead to a wide range of potential tax and legal problems. But how long should the company’s files be kept? The answer varies depending on company policies and the type of files, but generally, the files should be kept as long as they serve a useful purpose or until all legal and regulatory requirements are met.

Many businesses base how long they keep records on the length of the statute of limitations for breach of contract, breach of fiduciary duty, and professional liability claims. The statutes, of course, vary with each state.

Regarding tax records, the statute of limitations period for income tax returns is generally three years but is extended to six years if there is a substantial understatement of gross income. A good rule of 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.

Shown below are some suggested record retention periods, in printable form. These should only be used as a guide. Seeking the advice of your attorney, tax accountant or business insurance carrier when establishing a record retention policy is advisable.

It is also important to note that the IRS permits taxpayers to store certain tax documents electronically. According to IRS Publication 583, “You must keep your business records available at all times for inspection by the IRS.” Business owners can keep hard copies or electronic records, as the rules apply equally to both methods. This means an electronic storage system “must provide a complete and accurate record of your data” and be accessible to the IRS.

Your system “must index, store, preserve, retrieve, and reproduce the electronically stored books and records in [a] legible format.” The IRS can penalize your company if your electronic records do not meet the requirements and you have already disposed of the paper documents.

Suggested record retention periods

Use this printable guide as a starting point when organizing your business records.

Type of record	Suggested retention period
Accounting records
Auditors’ report and annual financial statements	Permanently
Bank statements and deposit slips	7 years
Cancelled checks, fixed assets	Permanently
Cancelled checks, payroll taxes	7 years
Cancelled checks, income taxes	Permanently
Cancelled checks, general	7 years
Cancelled checks, payroll	7 years
Cash disbursements	Permanently
Cash receipts journal	Permanently
Chart of accounts	Permanently
Deeds, mortgages, and bills of sale	Permanently
Electronic payment records	7 years
Employee expense reports	7 years
Fixed asset records, including invoices, cancelled checks, and depreciation schedules	Permanently
Freight bills and bills of lading	7 years
General journal	Permanently
General ledger	Permanently
Inventory listings and tags	7 years
Invoices, sales to customers and credit memos	7 years
Patent, trademark, and related papers	Permanently
Payroll journal	7 years
Production and sales reports	7 years
Purchases and purchase receipts	7 years
Purchase journal	Permanently
Purchase orders	7 years
Sales or work orders	7 years
Subsidiary ledgers, including accounts receivable, accounts payable, and equipment	7 years
Time cards and daily time reports	7 years
Training manuals	Permanently
Trial balance, year end	Permanently
Employee benefit plan records
Actuarial reports	Permanently
Allocation and compliance testing	7 years
Brokerage or trustee statements supporting investments	7 years
Financial statements	Permanently
General ledger and journals	Permanently
Information returns, Form 5500	Permanently
Internal Revenue Service and Department of Labor correspondence	Permanently
Participant communications related to distribution, termination, and beneficiaries	7 years
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
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 contracts, from date of termination	3 years
Tax records
IRS adjustments	Permanently
Payroll tax returns	7 years
Property basis records	Permanently
Sales and use tax returns	Permanently
Tax returns and cancelled checks for tax payments	Permanently

These periods are intended as a guideline. Your CPA or tax professional may recommend a different approach based on your industry and business needs.

Download the printable guide →

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