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Storing tax records: How long is long enough?

Proper record retention is crucial for tax compliance and business operations. This comprehensive guide will help you determine exactly how long to keep your important documents.

Quick Reference: Record Retention Periods

Business Records To Keep:

1 Year3 Years6 YearsForever

Personal Records To Keep:

1 Year3 Years6 YearsForever

Business Documents

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*

*Records related to a bad debt deduction or a loss claimed for worthless securities should be kept for 7 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
• 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
• 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
• Cash Books, Charts of Accounts
• Contracts, Leases Currently in Effect
• Corporate Documents (incorporation, charter, by-laws)
• Documents substantiating fixed asset additions
• Deeds
• Depreciation Schedules
• Financial Statements (Year-End)
• General and Private Ledgers
• Insurance Records, Current Accident Reports
• Investment Trade Confirmations
• IRS Revenue Agents' Reports
• Journals
• Legal Records, Correspondence
• 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

Personal Documents To Keep For One Year

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

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*

*Records related to a bad debt deduction or a loss claimed for worthless securities should be kept for 7 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

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.

Important Security Warning

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.

Record Retention Guide