the Right Tax Information
A common problem faced
by many business owners is knowing exactly what type of records must be
kept and for how long. The result is often boxes of papers that accumulate
and take up space.
Here are some general
guidelines on what to retain:
- Keep federal and
state tax returns forever.
- Keep the records
that support numbers in those tax returns until the statute of limitations
has expired. This is usually three years from when the return was filed,
but there is no limit for fraudulent tax returns.
- Keep annual financial
statements forever. Monthly or quarterly statements can be discarded
when they are not longer needed, but three years is a good rule of thumb.
- Records for equipment
that you own should be kept for as long as the equipment's depreciation
is reported on the company's tax return. Records for leased equipment
are like other tax supporting documents.
- Keep insurance
policies for as long as they are in effect, plus any extra time when
there may be a claim made under the policy. Also keep records of any
- Payroll records
must be kept for at least four years after any withholding and when
Social Security or unemployment tax is due or paid. Most advisors suggest
that employee financial information be kept a long time.
- Corporate papers,
such as articles of incorporation, board minutes/resolutions and ownership
records should be kept forever.
- General ledgers
should be kept forever.
For items not covered
above, consider six years to be a good time frame unless the records have
a continuing legal nature. Then keep them forever.