Tax records storage: how far is enough?
Federal legislation allows you to retain, for three years, copies of your tax returns and supporting records. This is called the "three-year law" and leads many individuals to assume that if they keep their records for this period, they are safe.
However, if the IRS suspects that the income has been substantially underreported (by 25 percent or more) or believes that there may be evidence of fraud, the audit may go back six years. Using the following instructions to be safe.
Build a backup set of documents and store them electronically. Unique situations It is easier than ever to maintain a backup collection of records—including, for example, bank accounts, tax returns, insurance plans, etc.—now that many financial institutions electronically provide statements and documentation, and a great deal of financial information is accessible on the Internet.
They can be scanned and transferred to a digital format even if the original records are only issued on paper. Taxpayers can download them to a backup storage unit, such as an external hard drive, until the records are in electronic form, or burn them on a CD or DVD (don't forget to mark them).
Online backup, which is the only way to ensure the information is completely preserved, could also be considered. With online backup, files are stored in another area of the world, so that records remain secure if a hurricane or other natural disaster occurs.
Business Documents for one year
- Customer and Distributor communications.
- Duplicate Slips for Deposit.
- Purchase Orders other than a copy of the Buying Department.
- Sheets Receiving.
- The Requisitions.
- Notebooks of a Stenographer.
- Stockroom Forms for Withdrawal.
Business Documents for three years
- Records of Employee Staff (after termination).
- Requests for Work.
- Insurance Plans Expired.
- Correspondence General.
- Reports from Internal Audit.
- External Announcements.
- Petty Vouchers in Cash.
- Tags for Physical Inventory.
- Employees' Savings Bond Registration Data.
- Timecards for Hourly Workers.
Business Documents for six years
- Claims, Injury Records.
- Accounts Ledgers and Schedules Payable.
- Ledgers and Plans for Accounts Receivable.
- Statements and reconciliations of banks.
- Checks canceled.
- Stock and Bond Certificates Revoked.
- Tax Records on Jobs.
- Review of expenditures and delivery plans of expenses.
- Contracts that have expired, rentals.
- Choice Records Expired.
- Service inventories, products, services.
- Invoices to Customers.
- Ledger Receivable Notes, Schedules.
- Records of payrolls and summaries, including pensioner payments.
- Ledgers on Plant Cost.
- Department of Buying Copies of Sales Orders.
- Records on Sales.
- Ledgers of Subsidiary.
- Books on Schedule.
- Records for Travel and Entertainment.
- Vouchers for Suppliers, Staff, etc. payments.
Business Records to Keep Forever
Although federal laws do not mandate you to maintain "forever," tax records, there will be other reasons why you will want to preserve these documents indefinitely in certain instances.
- CPAs/Accountants Audit Results.
- Cancelled Checks for large payments (especially tax payments).
- Cash Books, Account Maps.
- Contracts, new leases in place.
- Administrative records (incorporation, charter, by-laws, etc.).
- Documents explaining additions to fixed assets.
- Schedules for Depreciation.
- Accounting Reports (Year End).
- Ledgers General and Private, Year End Trial Balances.
- Records of insurance, recent accident records, lawsuits, policies.
- Confirmations on Investment Exchange.
- Reports from IRS Revenue Agents.
- Legal papers, correspondence, and other important matters.
- Minute Directors and Stockholders' Books. Mortgages, Sale Bills.
Personal Documents for one year
- Statements from the bank.
- Stubs for Paycheck (reconcile with W-2).
- Canceled inspections.
- Statements on monthly and quarterly mutual funds and retirement contributions (reconcile with yearend statement).
Personal Documents for three years
- Statements by Credit Card.
- Bills of Medicine (in case of insurance disputes).
- Records for Infrastructure.
- Insurance Plans Expired.
Personal Documents for six years
- Supporting records relating to tax returns.
- Claims and Injury Records.
- Bills of Medicine (if tax-related).
- Land Reports / Receipts for Enhancement.
- Receipts from Sales.
- Garnishments of the Salary.
- Other Bills relating to taxation.
Personal Records to Keep Forever
- Audit Reports from the CPA.
- Legal Records.
- Critical Correspondence.
- Returns on Income Tax.
- Checks for Income Tax Payment.
- Confirmations of Investment Exchange.
- Pension Records and Retirement.
- Records for Car (keep until the car is sold).
- Receipts for Credit Cards (keep with your credit card statement).
- Policies on insurance (keep for the life of the policy).
- Hypothecas / Deeds / Leases (keep 6 years beyond the agreement.)
- Paying Stubs (keep until reconciled with your W-2).
- Land Reports / receipts for enhancement (keep until property sold).
- Receipts from Sales (keep for life of the warranty).
- Stock and Documents for Bonds (keep for 6 years beyond selling).
- Warranties and guides (keep for the life of the product).
- Additional Bills (keep until payment is verified on the next bill).
- Depreciation Timetables and other records of capital assets (keep for 3 years after the tax life of the asset).