Storing Tax Records

The deadline for taxes has passed, and another year of tax forms and envelopes filled with receipts is now behind us. What should be done with these documents now that your check or refund request has been sent in the mail?

The “three-year law” states that Federal law requires individuals to keep copies of their tax returns and supporting documents for a period of three years. This leads many people to think that as long as they retain their documents for this period, they are safe.

It is important to note that while the “three-year law” applies in most cases, there are exceptions. If the IRS suspects that an individual has significantly understated their income (by 25% or more), they may go back six years during an audit. Additionally, if there is any indication of fraud or if a return is not filed, there is no time limit for the IRS to conduct an audit. To ensure compliance, it is recommended to follow the guidelines provided.

Business Documents To Keep For One Year

• Correspondence with Customers and Vendors
• Duplicate Deposit Slips
• Purchase Orders (other than Purchasing Department copy)
• Receiving Sheets
• Requisitions
• Stenographer’s Notebooks
• Stockroom Withdrawal Forms

Business Documents To Keep For Three Years

• Employee Personnel Records (after termination)
• Employment Applications
• Expired Insurance Policies
• General Correspondence
• Internal Audit Reports
• Internal Reports
• Petty Cash Vouchers
• Physical Inventory Tags
• Savings Bond Registration Records of Employees
• Time Cards For Hourly Employees

Business Documents To Keep For Six Years

• Accident Reports, Claims
• Accounts Payable Ledgers and Schedules
• Accounts Receivable Ledgers and Schedules
• Bank Statements and Reconciliations
• Cancelled Checks
• Cancelled Stock and Bond Certificates
• Employment Tax Records
• Expense Analysis and Expense Distribution Schedules
• Expired Contracts, Leases
• Expired Option Records
• Inventories of Products, Materials, Supplies
• Invoices to Customers
• Notes Receivable Ledgers, Schedules
• Payroll Records and Summaries, including payment to pensioners
• Plant Cost Ledgers
• Purchasing Department Copies of Purchase Orders
• Records related to net operating losses (NOL’s)
• Sales Records
• Subsidiary Ledgers
• Time Books
• Travel and Entertainment Records
• Vouchers for Payments to Vendors, Employees, etc.
• Voucher Register, Schedules

Personal Documents To Keep For One Year

It is important to hold onto year-end statements for mutual funds and IRA contributions permanently, however, there is no need to retain monthly and quarterly statements once the year-end statement has been received.

Personal Documents To Keep For Three Years

• Credit Card Statements
• Medical Bills (in case of insurance disputes)
• Utility Records
• Expired Insurance Policies

Personal Documents To Keep For Six Years

• Supporting Documents For Tax Returns
• Accident Reports and Claims
• Medical Bills (if tax-related)
• Sales Receipts
• Wage Garnishments
• Other Tax-Related Bills