It is important to keep track of your tax records, as federal law requires you to maintain copies of your tax returns and supporting documents for a minimum of three years. However, if the IRS believes you have significantly underreported your income or suspects fraud, it may go back six years in an audit. It is recommended to keep business and personal records for at least one year, three years, and six years, as well as indefinitely for certain documents. To ensure the safety and security of your records, consider creating a backup set and storing them electronically. You can also consider online backup for added protection against natural disasters. When disposing of records, be sure to shred them to protect against identity theft. It is important to follow these guidelines to avoid any issues during an audit and to have easy access to important documents.

For business records that should be kept indefinitely, it is recommended to keep audit reports from CPAs or accountants, cancelled checks for important payments (particularly tax payments), cash books and charts of accounts, contracts and leases currently in effect, corporate documents (such as incorporation, charter, and bylaws), documents substantiating fixed asset additions, deeds, depreciation schedules, financial statements (year-end), general and private ledgers, year-end trial balances, insurance policies (active or expired with claims outstanding), mortgage and loan agreements, partnership agreements, pension plan documents, and stock and bond certificates (owned or held for others).

For personal records, it is recommended to keep credit card statements, insurance records (excluding expired policies), investment records, medical records, and tax records for one year. It is recommended to keep bank statements, canceled checks, credit card receipts, and pay stubs for three years. It is recommended to keep tax records for charitable donations, records of home improvements, real estate records, and records of stocks and other investments for six years. It is recommended to keep adoption records, divorce decrees, legal documents, marriage certificates, military discharge papers, and records of stocks and other investments (owned or held for others) indefinitely.

It is important to note that these guidelines are recommendations and may vary depending on your specific circumstances. In addition, it is recommended to create a backup set of records and store them electronically, as a contingency measure.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, use the following guidelines.

Create a Backup Set of Records and Store Them Electronically. Keeping a backup set of records — including, for example, bank statements, tax returns, insurance policies, etc. — is easier than ever now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet.

Even if the original records are provided only on paper, they can be scanned and converted to a digital format. Once the documents are in electronic form, taxpayers can download them to a backup storage device, such as an external hard drive, or burn them onto a CD or DVD (don’t forget to label it).

You might also consider online backup, which is the only way to ensure that data is fully protected. With online backup, files are stored in another region of the country, so that if a hurricane or other natural disaster occurs, documents remain safe.

Business Documents To Keep For One Year

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

Business Documents To Keep For Three Years

• Employee Personnel 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

Business Documents To Keep For Six Years

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

Business Records To Keep Forever

While federal guidelines do not require you to keep tax records “forever,” in many cases there will be other reasons you’ll want to retain these documents indefinitely.

• Audit Reports from CPAs/Accountants
• Cancelled Checks for Important Payments (especially tax payments)
• 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
• Financial Statements (Year End)
• 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, Correspondence and Other Important Matters
• 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

Personal Documents To Keep For One Year

• Bank Statements
• Paycheck Stubs (reconcile with W-2)
• Canceled checks
• Monthly and quarterly mutual fund and retirement contribution statements (reconcile with year end statement)

Personal Documents To Keep For Three Years

• Credit Card Statements
• Medical Bills (in case of insurance disputes)
• Utility Records
• Expired Insurance Policies

Personal Documents To Keep For Six Years

• Supporting Documents For Tax Returns
• Accident Reports and Claims
• Medical Bills (if tax-related)
• Property Records / Improvement Receipts
• Sales Receipts
• Wage Garnishments
• Other Tax-Related Bills

Personal Records To Keep Forever

• CPA Audit Reports
• Legal Records
• Important Correspondence
• Income Tax Returns
• Income Tax Payment Checks
• Investment Trade Confirmations
• Retirement and Pension Records

Special Circumstances

• Car Records (keep until the car is sold)
• Credit Card Receipts (keep with your credit card statement)
• Insurance Policies (keep for the life of the policy)
• Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
• Pay Stubs (keep until reconciled with your W-2)
• Property Records / improvement receipts (keep until property sold)
• Sales Receipts (keep for life of the warranty)
• Stock and Bond Records (keep for 6 years beyond selling)
• Warranties and Instructions (keep for the life of the product)
• Other Bills (keep until payment is verified on the next bill)
• Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)

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