How long should you be storing your tax records?
Federal law requires you to maintain copies of your tax returns and supporting documents for three (3) years. This is called the "three-year law" and leads many people to believe they are safe provided they retain their documents for this period of time.
However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be an indication of fraud, they may go back six (6) years through an audit. To be safe we recommend following the below guidelines.
Personal Documents to Keep....
1 Year
- Bank statements
- Paycheck stubs (reconcile with your W-2s)
- Canceled checks
- Monthly/Quarterly mutual fund and retirement contribution statements
3 Years
- Credit card statements
- Medical bills (in case of insurance disputes)
- Utility records
- Expired insurance policies
6 Years
- Supporting documents for tax returns
- Accident reports & claims
- Medical bills (if tax-related)
- Property records & improvement receipts
- Sales receipts
- Wage garnishments
- Other tax-related bills
Forever
- CPA Audit reports
- Legal records
- Important correspondence
- Income tax returns
- Income tax payment checks
- Investment trade confirmations
- Retirement and pension records
Business Records to Keep....
1 Year
- Correspondence with customers and vendors
- Duplicate deposit slips
- Purchase orders
- Receiving sheets
- Requisitions
3 Years
- Employee Personnel Records (after termination)
- Employment applications
- Expired insurance policies
- General correspondence
- Internal audit reports
- Petty cash vouchers
6 Years
- Accident reports/claims
- Accounts Payable & Receivable ledgers
- Bank statements & reconciliations
- Expired contracts & leases
- Invoices to customers
- Payroll records
- Purchase Orders
- Sales records
- Time books
Forever
- Audit reports from Accountants/CPAs
- Canceled checks (especially for tax payments)
- Corporate documents (incorporation, charter, by-laws, etc.)
- Documents substantiating fixed asset additions
- Depreciation schedules
- Financial statements
- IRS Revenue Agent reports
- Legal records, correspondence and other important matters
- Mortgages, Bill of Sale
- Retirement and pension records
- Tax returns and worksheets
- Trademark and patent registrations