Save it or shred it? Use this record retention guide for business documents
Part of taking care of business is taking care of records and receipts. Good documentation practices can help business owners identify new income sources, monitor expenses and prepare auditable tax returns and financial statements.
But how should owners store business records? And for how long?
You can choose any recordkeeping system that works for your business — as long as it clearly shows evidence of income and expenses (aka, burden of proof). Taxpayers are responsible for validating the information on their tax returns, especially if they claim a deduction.
Document retention guidelines vary based on the action, event or expense that’s captured in the document. Some documents need to be stored for one, three or seven years, while others need to be retained forever.
Use this table as a general guide:
|
Item |
Record retention |
|
1099s |
7 years |
|
Accident reports/claims (settled cases) |
7 years |
|
Accounts payable and receivable ledgers and schedules |
7 years |
|
Audit reports |
Permanent |
|
Bank deposit slips |
7 years |
|
Bank reconciliations |
2 years |
|
Bank statements |
7 years |
|
Board minutes |
Permanent |
|
Brokerage statements (year-end) |
Ownership + 7 years |
|
Business licenses |
Permanent |
|
Bylaws |
Permanent |
|
Capital stock and bond records |
Permanent |
|
Cash books |
Permanent |
|
Charitable contribution records |
7 years |
|
Chart of accounts |
Permanent |
|
Checks — taxes, real estate, special contracts (file with papers related to transactions) |
Permanent |
|
Construction records |
Permanent |
|
Contracts — major |
Permanent |
|
Correspondence — general |
2 years |
|
Credit card statements |
7 years |
|
Deeds, mortgages and bills of sale |
Permanent |
|
Depreciation schedules |
Permanent |
|
Dividend reinvestment records |
Ownership + 7 years |
|
Divorce documents |
Permanent |
|
Electronic payment records |
7 years |
|
Employee files (ex-employees) |
7 years |
|
Employment applications |
3 years |
|
Employment taxes |
7 years |
|
Estate planning documents |
Permanant |
|
Expense records |
7 years |
|
Financial statements (annual) |
Permanent |
|
Fixed asset purchases |
Permanent |
|
General/private ledgers |
Permanent |
|
Home purchase and improvement documents |
Ownership + 7 years |
|
Home repair receipts |
Warranty period |
|
Insurance policies |
Life + 3 years |
|
Insurance records, current accident reports, claims, etc. |
Permanent |
|
Internal audit reports (longer retention periods may be desirable) |
3 years |
|
Inventory records — LIFO |
Permanent |
|
Investment purchase and sales documents |
Ownership + 7 years |
|
IRA annual reports and nondeductible contributions Form 8606 |
Permanent |
|
Journals |
Permanent |
|
Leasehold improvements |
Permanent |
|
Lease payment records |
Life + 4 years |
|
Leases/mortgages |
Permanent |
|
Loan payment schedules |
7 years |
|
Loans |
Term of loan + 7 years |
|
Mutual fund annual statements |
Ownership + 7 years |
|
Notes receivable ledgers and schedules |
7 years |
|
Options records (expired) |
7 years |
|
Patents/trademarks |
Permanent |
|
Payroll records |
7 years |
|
Pension/401(k)/profit-sharing plans |
Permanent |
|
Petty cash vouchers |
3 years |
|
Physical inventory tags |
3 years |
|
Plant cost ledgers |
7 years |
|
Property appraisals by outside appraisers |
Permanent |
|
Property records, including costs, depreciation reserves, year-end trial balances, depreciation schedules, blueprints and plans |
Permanent |
|
Purchase orders |
7 years |
|
Real estate purchases |
Permanent |
|
Receiving sheets |
1 year |
|
Retirement plan annual reports |
Permanent |
|
Requisitions |
1 year |
|
Sales commission reports |
3 years |
|
Sales records |
7 years |
|
Scrap, salvage records (inventories, sales, etc.) |
7 years |
|
Shareholder records |
Permanent |
|
Stock registers and transactions |
Permanent |
|
Subsidiary ledgers |
7 years |
|
Tax returns and other documents relating to determination of income tax liability |
7 years* |
|
Time books/cards |
7 years |
|
Trademark registration and copyrights |
Permanent |
|
Trial balance (year-end) |
Permanent |
|
Training manuals |
Permanent |
|
Union agreements |
Permanent |
|
Voucher register and schedules |
7 years |
|
Vouchers for payments to vendors, employees, etc. (includes allowances and reimbursement of employees, officers, etc., for travel and entertainment expenses) |
7 years |
|
W-2 forms |
7 years |
*Tax returns supporting net operating loss carryforwards should be maintained until the net operating loss is used, plus seven years. Tax documents that support basis in a pass-through entity (K-1s) should be maintained until the interest in the entity is disposed of, plus seven years.
How Wipfli can help
Not sure what to store and what to shred? Contact the audit and accounting team at Wipfli for best practices on record retention. Together, we can create a plan and a schedule to safeguard important records — and use them to uncover important insights. Contact us today to get started.
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