How long should you store tax records?

What is the appropriate length of time to store your tax records? The Federal Government follows the “three-year-law”. This law requires tax returns and documents associated with them to be stored for three years. While this measure generally proves safe, there may be reason for you to store your records even longer.

The Internal Revenue Service (IRS) can audit your information, tracing back up to six years. They have the authority to audit information if they have suspicions of fraud or suspect you’re significantly underreporting your income. Generally, after six years, it is acceptable to properly dispose of these records; however, there are a few you should consider storing indefinitely.

Remember, it’s imperative that you properly dispose of these vital records. To help avoid identity theft, don’t toss them in the garbage; always shred. It would be wise to store a backup of tax records and other appropriate documents online. Having a digital copy makes not only storing but also accessing and distributing these documents easier.

There are a few places you can store these documents, such as a CD or USB, an external hard drive, or a website or app. As a plus, it frees up office space without paper copies causing clutter. While this is a useful tool, it is important to be cautious and aware of your cybersecurity. Hackers can steal, encrypt, and even hold for ransom your critical files and information. Be smart with your technology; avoid suspicious links, emails, and websites that may contain spam.

For your reference, we have coordinated a list of specific documents correlating with their recommended storage time. Please contact us if you have any questions.  

1 Year

Business

• Duplicate Deposit Slips
• Purchase Orders (except for the Purchasing Department copy)
• Receiving Sheets
• Requisitions
• Correspondence with Customers and Vendors
• Stenographer’s Notebooks
• Stockroom Withdrawal Forms

Personal

• Bank Statements
• Pay Stubs
• Canceled Checks
• Mutual Fund and Retirement Contribution Statements (Monthly and Quarterly)

3 Years

Business

• Employee 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

Personal

• Credit Card Statements (Keep Receipts with Statements)
• Medical Bills
• Utility Records
• Expired Insurance Policies

6 Years

Business

• Accident Reports/Claims
• Accounts Payable/Receivable Ledgers and Schedules
• Bank Statements and Reconciliations
• Canceled Checks, Stock and Bond Certificates
• Employment Tax Records
• Expense Analysis and Expense Distribution Schedules
• Expired Contracts, Leases, and Option Records
• Inventories (Products, Materials, Supplies)
• Invoices to Customers
• Notes Receivable Ledgers and Schedules
• Payroll Records and Summaries
• Plant Cost Ledgers
• Copies of Purchase Orders (Purchasing Department)
• Sales Records
• Subsidiary Ledgers
• Time Books
• Travel and Entertainment Records
• Vouchers for payment to Vendors, Employees, Etc.
• Voucher Register Schedules

Personal

• Tax Return Supporting Documents
• Accident Reports and Claims
• Tax Related Medical Bills
• Sales Receipts
• Wage Garnishments
• Other Tax-Related Items

Indefinitely

Business

• Audit Reports from CPAs/Accountants
• Canceled Checks for Important Payments (Especially for Tax)
• Cash Books, Charts of Accounts
• Contracts, Leases Currently in Effect
• Corporate Documents (Incorporation, Charter, By-Laws, Etc.)
• Documents Substantiating Fixed Asset Additions
• Deeds
• Depreciation Schedules
• Year-End Financial Statements
• General and Private Ledgers, Year-End Trial Balances
• Insurance Records, Current Accident Reports, Claims, Policies
• Investment Trade Confirmations
• IRS Revenue Agents’ Reports
• Journals
• Legal Records (Include Correspondence)
• Minute 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
• Supporting Records for Net Operating Loss Carryforward Amounts (Keep for 6 Years after the NOL is Fully Utilized)

Personal

• CPA Audit Reports
• Legal Records
• Important Correspondence
• Income Tax Returns and Tax Payment Checks
• Gifts and Estate Tax Returns
• Investment Trade Confirmations
• Retirement and Pension Records
• Car Records (Until Car is Sold)
• Mortgages, Deeds, and Leases (For 6 Years after Agreement Ends)
• Property Records and Improvement Receipts (For 6 Years after Property is Sold)
• Sales Receipts (If Under Warranty)
• Stock and Bond Records (for 6 Years after Selling)
• Warranties and Instructions (For Life of Product)