Keeping and storing financial records is costly. It costs in office supplies such as boxes, folders, and filing cabinets to organize the records. It costs in rental expense for the extra room the files take up, so using services as fleet rentals is great to find the right accommodations for you. The retention period should be determined by the agency with the longest requirement. As an example, non-hired job applications should be kept one year after the position is filled. The date that the position is filled is the trigger date.
Agencies Requiring Retention – The IRS is not the only agency that might ask for your documents from prior years. Other agencies that may need records include the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, and many more on a national, state, or local level. You may see other records retention lists documenting varying lengths of time due to requirements in different states and reflecting different agencies.
Developing a Records Retention Policy
Your company should have a records retention policy to follow when handling email, customer and vendor files, and other business documents. It can consist of an Excel worksheet that has columns for the document description, a trigger event that signals the start of the retention period, such as disposal date, transaction date, or termination date, and the retention period. It costs in labor to develop and maintain the record retention policies and locate old files when necessary and it could even cost you a lot more if you decide to pay someone like the vistory-tax-law to help you out. But throwing files away too early can be costly too. Some files might be needed by various agencies or for legal reasons.
Basic Retention List – Following are some broad guidelines on retention periods. Make a list of each agency’s requirements in your country, state, city, county, and industry to create your own retention list:
Entity Organizational Documents — These are PERMANENT records: Articles of Incorporation, Bylaws, Partnership Agreements, Board of Directors Minutes, Shareholders Minutes, Legal Contracts, Labor Contracts, Property Records, such as Deeds, Loans, and Mortgages;
Finance and Tax ” Again, PERMANENT records: Income and Payroll Tax Returns, IRS Letters, Audit Reports, Year End Financial Statements, Proof of Major Asset Purchases, General Ledgers, and Retirement Plan Documents;
Finance and Tax ” 7 year Retention: Bank Statements, Cancelled Checks, Customer Invoices, Vendor Invoices, Sales Records, Subsidiary Ledgers;
Employee Records” PERMANENT records: Employee Medical Records related to exposure of toxic substances or required by OSHA, including Insurance Records, Policies, Claims and related correspondence;
Employee Records ” 7 to 11 years, depending on Agency: Personnel Files (after termination), Payroll Checks, Time Cards, Job Descriptions, Employee Accident Documents 9after settlement), Work Compensation Documents;
And when you do decide to toss any of these papers, be sure to shred them so your garbage doesn’t become a treasure chest for identity thieves.
Note: The above guidelines are based on general rules of thumb but are not meant to take the place of solid legal advice on legal documents or the guidance of your accounting, tax, or bookkeeping professional on financial records. You should always consult a professional before throwing anything away or developing your own policy for retaining records.