Storing Tax Records
Storing tax records: How long is long enough?
April 15 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail?
Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time.
However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, use the following guidelines.
| Records For Your Lockbox... | Records For Your Home... | Business Records To Keep... |
| Current | Current | |
| 3 Years | 3 Years | |
| 5 Years | ||
| 7 Years | 7 Years | |
| Permanent | Permanent | Permanent |
| 8 Tips To Save Time & Paper | ||
- Insurance policies including life, long-term care, disability, homeowners, automobile, umbrella liability
- Photos of fumishings & valuables
- Social Security cards
- Credit card data, account numbers & phone numbers
- Real estate closing info
- Birth certificates
Current Personal Documents To Keep Handy
- Deposit box information
- Contracts & service agreements
- Brokerage statement
Personal Documents To Keep For Three Years
- Bank statements, all accounts
- Bank & auto loan papers
- Brokerage statements
- Investments, annual statements
Personal Documents To Keep For Five Years
- Receipts for large purchases
- Warranty information
Personal Documents To Keep For Seven Years
- Tax returns & supporting papers
Personal Records To Keep Permanently
- Passports
Business Documents To Keep For Three Years
- Bank reconciliations
- Bank statements
- Employment applications
- Sales commission reports
- Insurance policies (expired)
Business Documents To Keep For Seven Years
- Garnishments
- Payroll records
- Personnel files (terminated)
- Time summaries
- Withholding tax statements
- Insurance records
- Audit reports
- Depreciation schedules
- Financial statements (year-end)
- General ledgers, year-end trial balance, journals
- Tax returns
- Accounts payable data
- Accounts receivable data
- Inventory records
- Invoices (customers and vendors)
- Contracts, mortgages, notes, and leases
- Stock and bond certificates
- Meeting minutes of condo association & board
Business Records To Keep Permanently
- Correspondence (legal & important matters only)
- Deeds, mortgages, and bills of sale
- Patents & related papers
- Minute books of directors, stockholders, bylaws
- Property appraisals
- Retirement & pension records
- Trademark registration and copyrights
- Capital stock and bond records: ledgers, transfer registers, stubs showing issues
- All condo association accounting records (current & preceding 10 years)
- Save emails to a folder on your computer in lieu of printing them out.
- Use a scanner to scan important documents into your system and save them all in an electronic folder. Shred the documents.
- Set up your bills to be received electronically and save them to a folder for future referehce after paying them.
- Pay your bills electronically through your bank or another bill paying service.
- Establish a teller scan system in your office to scan customer checks directly into your banking account. It saves depositing time and gets the funds into your account much faster.
- Pay bills online using a credit card, then pay your credit card electronically. (You'll also accumulate points for gifts, airline tickets, and more!)
- Set up a worksheet with all of your, subscriptions and expiration dates to avoid confusion, double payments, or missed payments.
- Back up your data to an offsite location... ALWAYS!
