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:

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.