Record Retention Guide Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three- year law" and leads many people to believe they're safe provided they retain their documents for this period of time.However, if the IRS believes you have significantly under reported 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.Caution: Identity theft is a serious threat in today's world, and it is important to take every precaution to avoid it. After it is no longer necessary to retain your tax records, financial statements, or any other documents with your personal information, you should dispose of these records by shredding them and not disposing of them by merely throwing them away in the trash.Business Documents To Keep For One YearCorrespondence with Customers and VendorsDuplicate Deposit SlipsPurchase Orders (other than Purchasing Department copy)Receiving SheetsRequisitionsStenographer's NotebooksStockroom Withdrawal FormsBusiness Documents To Keep For Three YearsEmployee Personnel Records (after termination)Employment ApplicationsExpired Insurance PoliciesGeneral CorrespondenceInternal Audit ReportsInternal ReportsPetty Cash VouchersPhysical Inventory TagsSavings Bond Registration Records of EmployeesTime Cards For Hourly EmployeesBusiness Documents To Keep For Six YearsAccident Reports, ClaimsAccounts Payable Ledgers and SchedulesAccounts Receivable Ledgers and SchedulesBank Statements and ReconciliationsCancelled ChecksCancelled Stock and Bond CertificatesEmployment Tax RecordsExpense Analysis and Expense Distribution SchedulesExpired Contracts, LeasesExpired Option RecordsInventories of Products, Materials, SuppliesInvoices to CustomersNotes Receivable Ledgers, SchedulesPayroll Records and Summaries, including payment to pensionersPlant Cost LedgersPurchasing Department Copies of Purchase OrdersSales RecordsSubsidiary LedgersTime BooksTravel and Entertainment RecordsVouchers for Payments to Vendors, Employees, etc.Voucher Register, SchedulesBusiness Records To Keep ForeverWhile 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/AccountantsCancelled Checks for Important Payments (especially tax payments)Cash Books, Charts of AccountsContracts, Leases Currently in EffectCorporate Documents (incorporation, charter, by-laws, etc.)Documents substantiating fixed asset additionsDeedsDepreciation SchedulesFinancial Statements (Year End)General and Private Ledgers, Year End Trial BalancesInsurance Records, Current Accident Reports, Claims, PoliciesInvestment Trade ConfirmationsIRS Revenue Agents' ReportsJournalsLegal Records, Correspondence and Other Important MattersMinute Books of Directors and StockholdersMortgages, Bills of SaleProperty Appraisals by Outside AppraisersProperty RecordsRetirement and Pension RecordsTax Returns and WorksheetsTrademark and Patent RegistrationsPersonal Documents To Keep For One YearBank StatementsPaycheck Stubs (reconcile with W-2)Canceled checksMonthly and quarterly mutual fund and retirement contribution statements (reconcile with year end statement)Personal Documents To Keep For Three YearsCredit Card StatementsMedical Bills (in case of insurance disputes) Utility RecordsExpired Insurance Policies Personal Documents To Keep For Six YearsSupporting Documents For Tax ReturnsAccident Reports and ClaimsMedical Bills (if tax-related)Property Records / Improvement ReceiptsSales ReceiptsWage GarnishmentsOther Tax-Related BillsPersonal Records To Keep ForeverAudit ReportsLegal RecordsImportant CorrespondenceIncome Tax ReturnsIncome Tax Payment ChecksInvestment Trade ConfirmationsRetirement and Pension RecordsSpecial CircumstancesCar 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) Have a Question Name Email Address Phone Question Thank you! 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