We are committed to increasing the wealth of our clients.
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 RECORD||RETENTION PERIOD|
|Copies of tax returns as filed||7 years after liquidation of entity|
|Tax and legal correspondence||7 years after liquidation of entity|
|Audit reports||7 years after liquidation of entity|
|General ledger and journals||7 years after liquidation of entity|
|Financial statements||7 years after liquidation of entity|
|Contracts and leases||7 years after liquidation of entity|
|Real estate records||7 years after liquidation of entity|
|Corporate stock records and minutes||7 years after liquidation of entity|
|Bank statements and deposit slips||6 Years*|
|Sales records and journals||6 Years*|
|Other records relating to revenue||6 Years*|
|Employee expense reports and records relating to travel and entertainment expenses||6 Years*|
|Cancelled checks||3 Years*|
|Paid vendor invoices||3 Years*|
|Employment tax records||4 Years*|
|Inventory records||3 Years**|
|Depreciation schedules||At least tax life of asset plus 3 years|
|Other capital asset records||At least tax life of asset plus 3 years|
Other records relating to expenses
Partnership agreements and amendments
Operating agreement and amendments (LLC)
* From the later of the tax return due date or filing date
** Longer if you use LIFO