Record Retention Guidelines
Taxpayers who are subject to the federal income tax or who are required to file information returns with the Internal Revenue Service, must keep accurate records. In the event your return is audited, the auditor will expect you to substantiate the revenue and expenses reported on the return with proper accounting documentation. Generally, no penalty is imposed for failure to keep the required records. However, in case of a dispute with the IRS, the burden of proof is on the taxpayer. Incomplete or nonexistent records may result in interest, penalties and loss of legitimate deductions.
This guide provides suggested retention times for specific types of records. It is prepared based on information published by the American Institute of Certified Public Accountants. However, it is not all inclusive. For questions about specific applications, consult with your Accountant or Tax Preparer.
Audit Records & Reports
Canceled Checks for Taxes, Property Purchases and Contracts
Charts of Accounts
Contracts & Leases (in effect)
Copyrights, Patents and Related Papers
Corporate Stock and Bond Records, Charters, Bylaws, Corporate Meeting Minute Books, Transfer Registers, Options, etc.
Current Insurance Records, Claims, Policies, etc.
Financial Statements (year-end. Others are optional)
Fixed Asset Records and Depreciation Records and Schedules
General Ledger and Journals
Income and other Tax Returns & Supporting Documentation
Real Estate Records (Deeds, Mortgages, Appraisals by Outside Appraisers, Bills of Sale, etc.)
Retirement and Pension Records
Tax and Legal Correspondence
Accident Reports / Settled Insurance Claims
Canceled Checks (exception noted above)
Canceled Stock & Bond Certificates and Expired Option Records
Employee Earnings Summaries and Payroll / Personnel Records
Expense Reports, Analyses, Distribution Schedules and Payment Vouchers
Expired Contracts, Mortgages, Notes and Leases
Group Disability and other Insurance Safety Reports
Inventory Records of Products, Materials and Supplies
Invoices to Customers and from Suppliers
IRS Form 8300: Report on Cash Transactions Over $10,000 Received in a Trade or Business
Plant Cost Ledgers and other Cost Accounting Records and Reports
Purchase Orders, Shipping & Receiving records and related correspondence
Scrap and Salvage Ledgers
Subsidiary Ledgers and Schedules for Accounts and Notes Payable and Accounts and Notes Receivable
Voucher Registers and Schedules
Withholding Tax Statements
Bank Statements and Deposit Slips
Expired Insurance Policies
Internal Audit Reports
Internal Reports (misc. financial)
Payroll Time Sheets or Cards
Petty Cash and Cash Paid-Out Vouchers
Physical Inventory Tags and Control Records
Records in support of Customer Guarantees and Warranties
Sales Commission Reports
Duplicate Deposit Slips
General Business Correspondence
Other Misc. Records
1. Real and Personal Property – Three years beyond the time the property is in use.
2. Passive Losses – If a taxpayer is unable to currently deduct a loss from a passive activity, they are permitted to carry forward the loss indefinitely until the loss is used to offset passive income or the passive activity is disposed of in a taxable transaction. Carry forward losses are computed on worksheets provided by the IRS and these worksheets should be retained until at least three years after the carry forward losses are used.
3. Nondeductible IRA Contributions – Taxpayers who make non-deductible IRA contributions are required by the IRS to retain all the tax records that pertain to such contributions until the taxpayer’s IRA’s are fully distributed. These records include form 8606, Forms 1040 or 1040A, Form 5498 and forms 1099-R or W-2P.
4. Principal Residence – Records verifying a taxpayer’s basis in his or her principal residence must be kept until he or she is sure they will no longer be an issue. Such records pertain to original cost, capital improvements and Form 2119 – Sale or Exchange of Principal Residence.
** Retention time is measured from the later of tax return due date or filing date, plus any amendment or extension date.