Many businesses aren’t sure how long records must be saved in the paperless era. Business and tax record-keeping is a boring, but important business activity, and if you make the wrong choices, you risk litigation, succession planning problems, and the wrath of the tax man.

Understanding how long should you keep business records will help you avoid these problems.

The Internal Revenue Service has established some basic record-keeping rules for tax documents.

Outside the tax arena, there’s remarkably little guidance about how long you should keep business paperwork. Most lawyers, accountants and bookkeeping services recommend keeping original documents for at least seven years. As a rule of thumb, seven years is sufficient time for defending tax audits, lawsuits and potential claims.

Pre-Employment Information: 

During employment and for 3 years if the applicant is not hired.

  • Job Advertisements
  • Interview notes and records
  • Background checks
  • Letters of reference
  • Employment verifications
  • Driving records
  • Resumes
  • Preliminary drug test results
  • Documents related to hiring/failure to hire
  • All documents related to selection procedures

Personnel Records:

  • I-9 Forms (store separately from personnel file): during employment plus 3 years from hiring or 1 year after termination, whichever is longer.
  • Records related to employment, including performance evaluations and disciplinary records: during employment and for at least 5 years after employment terminates.
  • Training, selection materials, handbooks, policies: for at least 6 years from the last date of use.
  • Payroll records: during employment plus 4 years.
  • Medical records (store separately from personnel file): during employment plus 4 years.

Benefit Plan

  • Plan records, including summary plan descriptions, annual reports, and reports of planned termination:
  • IRS Form 550: 6 years.

Government Reports

  • EEO-1 Report: 4 years after report is filed
  • VETS-100 Report: 4 years after report is filed
  • Affirmative Action Plans: 3 years
  • OSHA related records, including Forms 101/200/300/300A: 5 years
  • Business Tax Returns and supporting records must be kept until the IRS can no longer audit your return. In most cases, the IRS can audit you for three years after a filing, but that time period extends to six years if the IRS suspects you made a “substantial error” on your return.
  • Payroll tax records, including time sheets, wages, pension payments, tax deposits, benefits and tips must be kept for at least four years after the date the taxes fell due or the date you actually paid them, whichever is later.
  • Current employee files should be retained for at least seven years after an employee leaves, is terminated or retires. However, if an employee suffers a work-related accident or files a claim against the business, it’s advisable to retain your records for up to 10 years after the claim is resolved.
  • Job applicant information must be kept for at least three years, even if you didn’t hire the applicant.
  • Ownership Records, such as business formation documents, annual meeting minutes, by-laws, stock ledgers and property deeds, should be retained permanently.
  • Accounting Services Records should be retained for a minimum of seven years. Accountants, being a conservative bunch, will often recommend that you keep financial statements, check registers, profit and loss statements, budgets, general ledgers, cash books and audit reports permanently.
  • Operational Records, including bank account statements, credit card statements, canceled checks, cash receipts and check book stubs, follow the seven year rule.

These periods are not offered as final authority, but as a guide.

Your CPA, outsourced accounting service or tax attorney may recommend a different approach based on the rules of your industry and the specific needs of your business.

 

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