Storing Tax Records:

How Long is Long Enough?

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), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists.To be safe, use the following guidelines.

1 Year

Business Records to Keep for One Year


> Correspondence with Customers and Vendors > Duplicate Deposit Slips > Purchase Orders (other than Purchasing Dept. copy) > Receiving Sheets > Requisitions > Stenographer's Notebooks > Stockroom Withdrawal Forms





3 Years

Business Records to Keep for Three Years


> Employee Personnel Records (after termination) > Employment Applications > Expired Insurance Policies > General Correspondence > Internal Audit Reports > Internal Reports > Petty Cash Vouchers > Physical Inventory Tags > Savings Bond Registration Records of Employees > Time Cards For Hourly Employees





6 Years

Business Records to Keep for Six Years


> Accident Reports, Claims > Accounts Payable Ledgers and Schedules > Accounts Receivable Ledgers and Schedules > Bank Statements and Reconciliations > Cancelled Checks > Cancelled Stock and Bond Certificates > Employment Tax Records > Expense Analysis and Distribution Schedules > Expired Contracts, Leases > Expired Option Records > Inventories of Products, Materials, Supplies > Invoices to Customers > Notes Receivable Ledgers, Schedules > Payroll Records and Summaries > Pensioner payments > Plant Cost Ledgers > Purchasing Department Copies of Purchase Orders > Sales Records > Subsidiary Ledgers > Travel and Entertainment Records > Vouchers for Payments to Vendors, Employees, etc.





Forever

Business Records to Keep Forever


While federal guidelines do not require you to keep tax records "forever," in many cases there will be other reasons you'll want to retain these documents indefinitely. > Audit Reports from CPAs/Accountants > Cancelled Checks for Important Payments > Cash Books, Charts of Accounts > Contracts, Leases Currently in Effect > Corporate Docs (incorporation, charter, by-laws) > Documents substantiating fixed asset additions > Deeds > Depreciation Schedules > Financial Statements (Year End) > General and Private Ledgers, Year End Trial Balances > Insurance Records, Claims, Policies > Investment Trade Confirmations > IRS Revenue Agent Reports > Legal Records and Correspondence > Minutes Books of Directors and Stockholders > Mortgages, Bills of Sale > Property Appraisals by Outside Appraisers > Property Records > Retirement and Pension Records > Tax Returns and Worksheets > Trademark and Patent Registrations





Business Records to Keep

1 Year

Personal Records to Keep for One Year


While it's important to keep year-end mutual fund and IRA contribution statements forever, you don't have to save monthly and quarterly statements once the year-end statement has arrived.





3 Years

Personal Records to Keep for Three Years


> Credit Card Statements > Medical Bills (in case of insurance disputes) > Utility Records > Expired Insurance Policies





6 Years

Personal Records to Keep for Six Years


> Supporting Documents For Tax Returns > Accident Reports and Claims > Medical Bills (if tax-related) > Sales Receipts > Wage Garnishments > Other Tax-Related Bills





Forever

Personal Records to Keep Forever


> CPA Audit Reports > Legal Records > Important Correspondence > Income Tax Returns > Income Tax Payment Checks > Property Records/Receipts (or 6 years after property sold) > Investment Trade Confirmations > Retirement Records (until distributions are made) > Pension Records (until distributions are made)





Personal Records to Keep

Case by Case Basis


> Car Records (keep until the car is sold) > Credit Card Receipts (keep with your credit card statement) > Insurance Policies (keep for the life of the policy) > Mortgages / Deeds / Leases (keep 6 years beyond the agreement) > Pay Stubs (keep until reconciled with your W-2) > Property Records / improvement receipts (keep until property sold) > Sales Receipts (keep for life of the warranty) > Stock and Bond Records (keep for 6 years beyond selling) > Warranties and Instructions (keep for the life of the product) > Other Bills (keep until payment is verified on the next bill) > Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)





Special Circumstances

Due to the COVID-19 crisis, our office remains closed to the public until further notice. We are working remotely and will continue to provide uninterrupted service to our clients. Please contact us with any questions or for more information.

TRACEY S. PETERS CPA, LLC

4833 Ellicott Woods Lane

Ellicott City, MD 21043

Phone: 410.418.9111

Fax: 410.313.9875

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