Record Retention Guidelines
We are frequently asked "How long should we retain our records?"
Normally, business and personal records need to be maintained until after the expiration of the statute of limitations for a tax year. The current Federal statute is three years from the due date of the tax return. If you file your return late the statute is two years after the return is filed if that date is later. California adds one additional year to the Federal statute of limitations. Accordingly, we recommend maintaining bulk records for a period of five years after the end of a given year.
Of course, some records really don't need to be maintained for more that a year or so, others for an extended period of time and yet others should be maintained permanently. Use common sense.
Items for potential permanent retention include:
- Bond records, ledgers, transfer registers and related items
- Canceled checks (for important payments such as purchases of property)
- Common stock, ledgers, transfer registers and related items
- Corporate charter and by-laws
- Deeds, mortgages, and bills of sale
- Financial Statements and reports of accountants or auditors
- Fixed asset records and depreciation schedules
- Liability insurance records, accident reports, claims, policies, etc.
- Minute books of directors and stockholders
- Property appraisals
- Tax returns
Items for potential extended retention include :
- Contracts and leases still in effect
- Investment purchase records (keep until the investment is sold)
- Personnel records of active employees
Items for five year retention:
- Accounts payable ledgers
- Accounts receivable ledgers
- Bank reconciliation's
- Charts of accounts
- Contracts and leases (expired)
- Canceled checks
- Employee personnel records (after termination)
- Expense analyses and expense distribution schedules
- General ledgers
- Inventories of products, materials, supplies
- Invoices to customers
- Invoices from vendors
- Payroll records
- Petty cash vouchers
- Property insurance policies (expired)
- Year end payable and receivable agings
Items for which shorter retention is appropriate:
- Correspondence with customers or vendors
- Customer sales records
- Monthly or periodic internal financial statements
- Monthly payable and receivable agings
- Physical inventory counts
- Purchase orders
- Receiving reports
- Customer sales records
REMEMBER! Use common sense in record retention.
If you need additional information about record retention matters please contact us at (310) 258-0520 or by E-mail.
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© 1996 Roscoe & Swanson, Accountancy Corporation. All rights reserved.
Last revised: September 20, 1999