Keep records of satisfied loans for seven years also. You needn't keep bank and credit card statements longer than a year, unless they contain entries that you are using for your tax filing. If they do, follow the rules for tax documents discussed earlier. In today's digital age, both paper and electronic records are acceptable forms of documentation. Make sure that records you have scanned into your computer files are legible, however.
The IRS recommends you back up your paper documents electronically in case of flood, fire, or other disaster. Choose a method of electronic storage--whether on your computer, in the cloud, or on a thumb drive or external hard drive—that offers the most safety and security against identity theft.
Make sure your computer is password protected, and consider using an encryption program like Microsoft BitLocker, Apple FileVault, or a third-party program. Choose a well-protected cloud storage program, and use a unique and complex password with two-factor authentication. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.
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Grow Your Legal Practice. Meet the Editors. It all depends on the document and your business. Reasons for Retaining Business Records When you think about retaining records and documents, the first thing that probably comes to mind is an IRS audit.
Here are a few of them: Lenders whom you approach for financing might require income, sales history, and other documents. When you are negotiating with landlords, insurers, and other vendors, having a clear and written history of previous leases, insurance policies, and other contracts might strengthen your position.
Understanding how long you should keep these records will help you avoid these problems. The IRS states you need to keep your records "as long as needed to prove your income or deductions on a tax return"; this means you need to keep your tax records for three years from the date your return was submitted.
For example, if you file your tax return a few months ahead February 15, of the deadline, this means you need to keep all receipts, tax records, and all additional documentation related to the return until April 15, -- three years after the deadline. The three-year rule is due to the period of limitations , which is the time during which you can amend your tax return or in the time when the IRS can perform an audit.
When the period of limitation expires, you are no longer required to keep the tax return or supporting documentation. The IRS states you can use any record keeping system as long as it "clearly shows your income and expenses. However, in the digital age, it's best to go paperless. The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax.
The information below reflects the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date. Note: Keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return. The following questions should be applied to each record as you decide whether to keep a document or throw it away.
Most lawyers, accountants and bookkeeping services recommend keeping original documents for at least seven years. As a rule of thumb, seven years is sufficient time for defending tax audits, lawsuits and potential claims.
These periods are not offered as final authority, but as a guide. Your CPA, outsourced accounting service or tax attorney may recommend a different approach based on the rules of your industry and the specific needs of your business. Blog Careers Login. Our Blog. Resources Blog.
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