Data Retention Policies: What You Need To Know

Did you know that the International Revenue Service (IRS) dictates record retention for businesses in the event that documents are needed to prove income or a deduction on tax returns?

By disposing of business records too soon or holding onto them for too long, your organization may face millions of dollars worth of penalties, lost lawsuits and storage issues. There’s also different lengths of time for businesses to retain documents depending on the type of records in question.

It’s always good to use your best judgement in consultation with your CPA in order to create a working schedule for data retention, as a failure to do so could result in financial hardship. Below is an example of a retention record schedule:

Accounts Payable Invoices3STATE
Accounts Payable LedgerPermanentlyAdministrative Decision
Accounts Receivable Invoices & Ledgers5Administrative Decision
Balance SheetsPermanentlyAdministrative Decision
Bank Deposits3Administrative Decision
Bank Statements3Administrative Decision
Capital Asset Record3 after saleAdministrative Decision
Cash Receipt Records7Administrative Decision
Check RegisterPermanentlyAdministrative Decision
Checks, Dividend6
Checks, Payroll2 STATE
Checks, cancelled3 STATE
Cost Accounting Records5Administrative Decision
Earnings Register3 STATE
Entertainment Gifts & Gratuities3Administrative Decision
Expense Reports3Administrative Decision
Financial Statements, CertifiedPermanentlyAdministrative Decision
Financial Statements, Periodic2Administrative Decision
General Ledger RecordsPermanentlyCode of Federal Regulations
Labor Cost Records3Code of Federal Regulations
Note RegisterPermanentlyAdministrative Decision
Payroll Registers3 STATE
Petty Cash Receipts3Administrative Decision
P & L StatementsPermanentlyAdministrative Decision
Salesman Commission Reports3Administrative Decision
Travel Expense Reports2Administrative Decision
Work Papers, Rough2Administrative Decision
Audit Reports10Administrative Decision
Classified Documents: Inventories,
Reports, Receipts10Administrative Decision
Annual ReportsPermanentlyAdministrative Decision
Authority to Issue SecuritiesPermanentlyAdministrative Decision
Bonds, Surety3Administrative Decision
Capital Stock LedgerPermanentlyAdministrative Decision
Charters, Constitutions, BylawsPermanentlyAdministrative Decision
ContractsPermanentlyAdministrative Decision
Corporate Election RecordsPermanentlyAdministrative Decision
Incorporation RecordsPermanentlyAdministrative Decision
Stock Transfer & StockholderPermanentlyAdministrative Decision
Insurance PoliciesPermanentlyAdministrative Decision
Patents & Related MaterialPermanentlyAdministrative Decision
Trademark & CopyrightsPermanentlyAdministrative Decision>
Accident Reports, Injury Claims, Settlements30 STATE
Applications, Changes & Terminations5Code of Federal Regulations
Attendance Records7Administrative Decision
Employee Contracts6Administrative Decision
Fidelity Bonds3Administrative Decision
Garnishments5Administrative Decision
Health & Safety BulletinsPermanentlyAdministrative Decision
Injury Frequency ChartsPermanentlyCode of Federal Regulations
Insurance Records, Employees11INS
Job Descriptions2Code of Federal Regulations
Rating Cards2Code of Federal Regulations
Time Cards2Code of Federal Regulations
Depreciation SchedulesPermanentlyAdministrative Decision
Inventory RecordsPermanentlyAdministrative Decision
Maintenance & Repair, Building10Administrative Decision
Maintenance & Repair, Machinery5Administrative Decision
Plant Account Cards, EquipmentPermanentlyCode of Federal Regulations
Property DeedsPermanentlyAdministrative Decision
Purchase or Lease Records of Plant FacilityPermanentlyAdministrative Decision
Annuity or Deferred Payment PlanPermanentlyCode of Federal Regulations
Depreciation SchedulesPermanentlyCode of Federal Regulations
Dividend RegisterPermanentlyCode of Federal Regulations
Employee Withholding4Code of Federal Regulations
Excise Exemption Certificates4Code of Federal Regulations
Excise Reports (Manufacturing)4Code of Federal Regulations
Excise Reports (Retail)4Code of Federal Regulations
Inventory ReportsPermanentlyCode of Federal Regulations
Tax Bills & StatementsPermanentlyAdministrative Decision
Tax ReturnsPermanentlyAdministrative Decision
Sales Tax ReturnsPermanentlyAdministrative Decision
Payroll Tax Returns7 YearsAdministrative Decision
Pension ReturnsPermanentlyAdministrative Decision, Record Retention Table

To be safe, it’s always a good idea to keep documents for a minimum of 7 years if the documentation supports a tax return deduction. If the deposit of cash resulted from an asset acquisition or sale, keep the document for 7 years post sale. Tax returns should be permanently kept, aside from payroll returns, which may be discarded after 7 years.

For more information, you can check out the IRS website here.

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