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Retention of Records

GUIDELINES

There are specific guidelines that govern how long a business must keep certain client records. Some businesses simply keep records until there is no longer sufficient space to store them, forcing the owners and staff to address the issue after it has likely become overwhelming. Which records can be destroyed? Which must be retained, and how do you go about storing them in a matter in which locating them is efficient and cost-effective? Developing guidelines to address record retention can be easier if you know the regulations that govern retention and storage of specific documents, as outlined below. 

Electronic Files 

As the use of computers for storing records becomes more secure and available, the storage of electronic files will become a major issue for businesses who wish to eliminate paper stores and reduce office space dedicated to file cabinets. There are federal guidelines issued by the Internal Revenue Service (IRS) that govern electronic file storage/retention. A business must be able to produce legible records that support and reconcile books and tax returns. Source documents in the form of machine-sensible records must be readily retrievable and contain sufficient transaction level detail to easily identify them. In addition, there are more specific guidelines that cover the documentation of procedures, the contents of files and system checks. 

Staff (Personnel) Records

You must keep personnel records for a staff member for the duration of his/her employment with your company. Should an employee leave your firm, there are additional guidelines regarding how long records should be kept after the termination date. See our chart to review specific guidelines for this situation. 

Corporate Records

Items such as by-laws, articles of incorporation, board minutes and stock records must be considered permanent records and thus kept indefinitely.

Accounting and Tax Records

Supporting documents for tax returns should be kept in a secure and readily available location at all times; this would include items such as records that support a company's income, expenses and tax credits reported on each income tax return until the statute of limitations period for such documents expires. The IRS can audit a tax return for a period of three (3) years after the date on which it was due or the date the tax was actually paid, whichever is later. Be aware though, if a company underreports a large sum of income, the IRS can audit for a period of six (6) years after the due date (or nearly seven (7) years after the tax year). In light of this, it is wise to keep tax records for a period of seven (7) years.

Employee Benefits Plan Records

Should a filing under ERISA be made all documentation/supporting documents necessary for verification of any aspect of the filing must be retained for a period of six (6) years after the filing date Such documentation will vary based on the plan, but, the minimum should be the basic information that would verify the accuracy and completeness of all required disclosures and the Annual Report. Such records would be brokerage or trustee statements supporting the investment experience of the plan, payroll and related data to support eligibility allocations and compliance testing and participant communications related to terminations, loans or designations of beneficiary.

To learn more specifics, review the chart listing specific records and their corresponding retention guidelines.

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TYPE OF RECORD

TIME PERIOD TO RETAIN

ACCOUNTING RECORDS

Auditors' Report/Annual Financial Stmts.

Permanently

Bank Statements and Deposit Slips

7 Years

Cancelled Checks:

- Fixed Assets

Permanently

- Taxes (Payroll Related)

7 Years

- Taxes (Income)

Permanently

- General

7 Years

- Payroll

7 Years

Cash Disbursements Journal

Permanently

Cash Receipts Journal

Permanently

Chart of Accounts

Permanently

Deeds, Mortgages, Bills of Sale

Permanently

Electronic Payment Records

7 Years

Employee Expense Reports

7 Years

Fixed Asset Records (Invoices, Cancelled Checks, 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/Credit Memos

7 Years

Patent/Trademark and Related Papers

Permanently

Payroll Journal

Permanently

Production and Sales Reports

7 Years

Purchases

7 Years

Purchase Journal

Permanently

Purchase Orders

7 Years

Sales or Work Orders

7 Years

Subsidiary Ledgers (Accts. Receivable, Accts. Payable, 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/Trustee Statements Supporting Investments

7 Years

Financial Statements

Permanently

General Ledger and Journals

Permanently

Information Returns (Form 5500)

Permanently

Internal Revenue Service/Department of Labor Correspondence

Permanently

Participant Communications related to Distributions, Terminations, 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) (from date of termination)

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 contacts (from date of termination)

3 Years


TAX RECORDS

IRS or FTB Adjustments

Permanently

Payroll Tax Returns

4 Years

Property Basis Records

Permanently

Sales and Use Tax Returns

Permanently

Tax Returns and Cancelled Checks for Tax Payments

Permanently