Records Retention

Many clients have asked what records and for how long to maintain records. I will try to outline retention recommendations.

For all entities’ purchase agreements for the purchase of real estate should be maintained as long as the real estate is owned and for a period of up to 6 years after the filing of the return reporting the sale.

Computer records should be maintained the same as paper records.

TAX RECORDS

Generally the IRS can audit a return for 3 years after filing. However, if there is a major understatement of income they can audit for a period up to 6 years. Due to this, records should be maintained for 6 years.

Documentation should be maintained to support all deductions taken on the respective return. This includes receipts, calendars and cancelled checks.

 
BUSINESS

Employment records should be maintained for at least 4 years, but a longer period is safer.

 Corporate records should be maintained as long as the company is in existence. These include original records regarding formation and registering of business, corporate stock book, minutes of corporation board of director meetings. Pension plan documents should also be maintained indefinitely.

For the purchase of all Fixed Assets original purchase agreements have to be maintained as long as asset is in service. After the assets is sold or retired, documents should be maintained using standard retention time periods.

PERSONAL

Original purchase documents and documents to support improvements to your personal residence have to be maintained for duration of ownership of residence and for up to 6 years after the filing of the return reporting the sale. This will document cost basis of residence.

For all stock investments the original cost documents must be maintained until after the asset is sold. These documents have to be retained for at least 3 years after the filing of the return reporting the sale. It is recommended to maintain for a 6 year period.

Roth IRA contribution records should be maintained indefinitely to support the contributions.