We are available to consult with you to make sure you and your business avoid penalty exposure by being in full compliance with the new IRS computerized recordkeeping rules.

Federal tax laws require taxpayers to maintain the books and records needed to support amounts reported on federal tax returns. These days, many taxpayers keep some or all of their financial and tax records in an electronic (computerized) format. The IRS recently issued new guidelines for such computerized records. The federal government can potentially seek civil and criminal penalties if these guidelines are not followed. The specific rules relating to the period records must be kept are quite detailed; however, as general guidelines, we recommend the record retention periods listed below. In some cases, the recommendation may be for nontax reasons, for example for environmental liability-exposure reasons, keep real estate records forever.

Remember, the items listed below are general guidelines.

TYPE OF RECORDRETENTION PERIOD
Copies of tax returns as filed7 years after liquidation of entity
Tax and legal correspondence7 years after liquidation of entity
Audit reports7 years after liquidation of entity
General ledger and journals7 years after liquidation of entity
Financial statements7 years after liquidation of entity
Contracts and leases7 years after liquidation of entity
Real estate records7 years after liquidation of entity
Corporate stock records and minutes7 years after liquidation of entity
Bank statements and deposit slips6 Years*
Sales records and journals6 Years*
Other records relating to revenue6 Years*
Employee expense reports and records relating to travel and entertainment expenses6 Years*
Cancelled checks3 Years*
Paid vendor invoices3 Years*
Employment tax records4 Years*
Inventory records3 Years**
Depreciation schedulesAt least tax life of asset plus 3 years
Other capital asset recordsAt least tax life of asset plus 3 years

Other records relating to expenses


Partnership agreements and amendments


Operating agreement and amendments (LLC)

3 Years*


Permanently


Permanently

* From the later of the tax return due date or filing date
** Longer if you use LIFO