Record Retention

We are available to consult with you to make sure you and your business avoid penalty exposure by being in full compliance with the new IRS computerized recordkeeping rules.

Federal tax laws require taxpayers to maintain the books and records needed to support amounts reported on federal tax returns. These days, many taxpayers keep some or all of their financial and tax records in an electronic (computerized) format. The IRS recently issued new guidelines for such computerized records. The federal government can potentially seek civil and criminal penalties if these guidelines are not followed. The specific rules relating to the period records must be kept are quite detailed; however, as general guidelines, we recommend the record retention periods listed below. In some cases, the recommendation may be for nontax reasons, for example for environmental liability-exposure reasons, keep real estate records forever.

Remember, the items listed below are general guidelines

TYPE OF RECORD RETENTION PERIOD
Copies of tax returns as filed 7 years after liquidation of entity
Tax and legal correspondence 7 years after liquidation of entity
Audit reports 7 years after liquidation of entity
General ledger and journals 7 years after liquidation of entity
Financial statements 7 years after liquidation of entity
Contracts and leases 7 years after liquidation of entity
Real estate records 7 years after liquidation of entity
Corporate stock records and minutes 7 years after liquidation of entity
Bank statements and deposit slips 6 Years*
Sales records and journals 6 Years*
Other records relating to revenue 6 Years*
Employee expense reports and records relating to travel and entertainment expenses 6 Years*
Cancelled checks 3 Years*
Paid vendor invoices 3 Years*
Employment tax records 4 Years*
Inventory records 3 Years**
Depreciation schedules At least tax life of asset plus 3 years
Other capital asset records At least tax life of asset plus 3 years
Other records relating to expenses

Partnership agreements and amendments

Operating agreement and amendments (LLC)

3 Years*

Permanently

Permanently

 

* From the later of the tax return due date or filing date
** Longer if you use LIFO