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:
TYPE OF RECORD | RETENTION | AUTHORITY |
ACCOUNTING & FISCAL | PERIOD YEARS | |
Accounts Payable Invoices | 3 | STATE |
Accounts Payable Ledger | Permanently | Administrative Decision |
Accounts Receivable Invoices & Ledgers | 5 | Administrative Decision |
Balance Sheets | Permanently | Administrative Decision |
Bank Deposits | 3 | Administrative Decision |
Bank Statements | 3 | Administrative Decision |
Capital Asset Record | 3 after sale | Administrative Decision |
Cash Receipt Records | 7 | Administrative Decision |
Check Register | Permanently | Administrative Decision |
Checks, Dividend | 6 | |
Checks, Payroll | 2 | STATE |
Checks, cancelled | 3 | STATE |
Cost Accounting Records | 5 | Administrative Decision |
Earnings Register | 3 | STATE |
Entertainment Gifts & Gratuities | 3 | Administrative Decision |
Expense Reports | 3 | Administrative Decision |
Financial Statements, Certified | Permanently | Administrative Decision |
Financial Statements, Periodic | 2 | Administrative Decision |
General Ledger Records | Permanently | Code of Federal Regulations |
Labor Cost Records | 3 | Code of Federal Regulations |
Note Register | Permanently | Administrative Decision |
TYPE OF RECORD | RETENTION | AUTHORITY |
PERIOD YEARS | ||
Payroll Registers | 3 | STATE |
Petty Cash Receipts | 3 | Administrative Decision |
P & L Statements | Permanently | Administrative Decision |
Salesman Commission Reports | 3 | Administrative Decision |
Travel Expense Reports | 2 | Administrative Decision |
Work Papers, Rough | 2 | Administrative Decision |
ADMINISTRATIVE RECORDS | ||
Audit Reports | 10 | Administrative Decision |
Classified Documents: Inventories, | ||
Reports, Receipts | 10 | Administrative Decision |
CORPORATE | ||
Annual Reports | Permanently | Administrative Decision |
Authority to Issue Securities | Permanently | Administrative Decision |
Bonds, Surety | 3 | Administrative Decision |
Capital Stock Ledger | Permanently | Administrative Decision |
Charters, Constitutions, Bylaws | Permanently | Administrative Decision |
Contracts | Permanently | Administrative Decision |
Corporate Election Records | Permanently | Administrative Decision |
Incorporation Records | Permanently | Administrative Decision |
Stock Transfer & Stockholder | Permanently | Administrative Decision |
Insurance Policies | Permanently | Administrative Decision |
Patents & Related Material | Permanently | Administrative Decision |
Trademark & Copyrights | Permanently | Administrative Decision> |
PERSONNEL | ||
Accident Reports, Injury Claims, Settlements | 30 | STATE |
Applications, Changes & Terminations | 5 | Code of Federal Regulations |
Attendance Records | 7 | Administrative Decision |
Employee Contracts | 6 | Administrative Decision |
Fidelity Bonds | 3 | Administrative Decision |
Garnishments | 5 | Administrative Decision |
Health & Safety Bulletins | Permanently | Administrative Decision |
Injury Frequency Charts | Permanently | Code of Federal Regulations |
Insurance Records, Employees | 11 | INS |
Job Descriptions | 2 | Code of Federal Regulations |
Rating Cards | 2 | Code of Federal Regulations |
Time Cards | 2 | Code of Federal Regulations |
PLANT & PROPERTY RECORDS | ||
Depreciation Schedules | Permanently | Administrative Decision |
Inventory Records | Permanently | Administrative Decision |
Maintenance & Repair, Building | 10 | Administrative Decision |
Maintenance & Repair, Machinery | 5 | Administrative Decision |
Plant Account Cards, Equipment | Permanently | Code of Federal Regulations |
Property Deeds | Permanently | Administrative Decision |
Purchase or Lease Records of Plant Facility | Permanently | Administrative Decision |
TYPE OF RECORD | RETENTION | AUTHORITY |
TAXATION | ||
Annuity or Deferred Payment Plan | Permanently | Code of Federal Regulations |
Depreciation Schedules | Permanently | Code of Federal Regulations |
Dividend Register | Permanently | Code of Federal Regulations |
Employee Withholding | 4 | Code of Federal Regulations |
Excise Exemption Certificates | 4 | Code of Federal Regulations |
Excise Reports (Manufacturing) | 4 | Code of Federal Regulations |
Excise Reports (Retail) | 4 | Code of Federal Regulations |
Inventory Reports | Permanently | Code of Federal Regulations |
Tax Bills & Statements | Permanently | Administrative Decision |
Tax Returns | Permanently | Administrative Decision |
Sales Tax Returns | Permanently | Administrative Decision |
Payroll Tax Returns | 7 Years | Administrative Decision |
Pension Returns | Permanently | Administrative Decision |
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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