File Retention Quick-Guide

 

 

 

 

 

 

 

With all the rules and regulations related to recordkeeping and file retention, many individuals and business owners can be apprehensive about destroying or throwing away anything.  While this may ensure that you are meeting all file retention regulations, it is a surefire way of amassing so much paper and/or electronic files that you can’t really find anything anyway.

With that, and the fact that tax deadlines are just around the corner, the following guide provides a quick reference for individuals and business owners to ensure effective and efficient recordkeeping and file retention practices.

 

Individuals

·        Unless you fail to file or file a fraudulent annual income tax return, copies of individual tax returns should be maintained for at least three years until the statute of limitations expires, however, many accountants recommend retaining this information for seven years or more.

-         This includes paystubs or W2s, 1099s, and all other supporting documentation for income and deductions.

 

Businesses

Tax:

·        Unless you fail to file or file a fraudulent annual income tax return, copies of business tax returns and supporting documentation should be maintained for at least three years until the statute of limitations expires, however, many accountants recommend retaining this information for seven years.

·        All records relating to property or assets should be retained for a minimum of three years after the asset is disposed of or sold.

-         This includes all basis, depreciation, depletion and/or capitalized improvement information.

-         Also note that, in the event of a nontaxable asset exchange, regulations require that, because the value of the old traded asset is included in the calculation of the newly acquired asset’s value, records for both the old and new assets must be retained until a taxable sale or disposal occurs.

Employee Records:

·        All employment tax records and returns should be maintained for at least four years after the tax is due or paid, whichever is later.

-         This includes copies of returns, deposit confirmations, payroll records and timecards.

·        All general employee file information (name, address, social security number, occupation, benefit information, performance reviews, etc.) should be retained for four years.

·        Employee Eligibility Verification Forms (INS Form I-9) must be maintained for three years after date of hire or one year after date of termination, whichever is later.

·        The Employee Retirement Income Security Act (ERISA) requires that all retirement benefit information be retained for a minimum of six years.

·        The Occupational Safety and Health Act (OSHA) requires that records of job-related injuries and illnesses be retained for five years.  In addition, any records related to medical exams along with toxic substances and blood-borne pathogen exposure must be maintained for thirty years after termination of employment.

The important thing to remember when designing any file retention program is that there are multiple regulatory agencies (state, federal or otherwise) that dictate the length of time records must be maintained and these retention periods won’t all be the same.  In these instances, individuals and businesses should comply with the longest retention period for that specific record. 

 

On the other hand, however, when your retention period has expired and if you don’t foresee any outstanding issues with your records, be confident that you can safely “clean house” and purge all outdated records, being sure to properly shred or securely dispose of the files and information. 

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