One question that I get asked a lot is:
How Long Should You Keep All Those Records???
Tax returns and supporting documents:
- Personal-At least 3 years from the date you filed the return (that’s how long the IRS has to audit you, unless they suspect fraud, for which there is no statue of limitations.) However, we recommend you keep for at least 7 years. If you have digital copies of everything, then keep indefinitely.
- Business-Same as personal
- Any correspondence/information returns you receive from the IRS need to be saved indefinitely (for example-EIN number, S Corp election acceptance letter, change of address etc).
- Personal-Pay stubs for one year (be sure to download copies every month from your employer’s online portal-if you ever leave the job, you will lose access to them). W2’s-same period as your tax returns.
- Business-Employee records need to be kept for at least 7 years after they are no longer working for you. If you change payroll services, don’t forget to download any documents/records being stored with the payroll service so you have copies for your records.
Bank and credit card statements:
- Personal-Keep digital copies (again, download from your bank every month in case you ever change banks) for at least a year.
- Business-Keep for at least 7 years to support your deductions. Keep in mind that the IRS wants to see original receipts as support documentation and “generally” will not accept a line item on a bank or credit card statement. But, it’s still good to keep the statements in case you lose receipts.
Insurance records personal and/or business:
- Current policies-keep indefinitely
- Expired/cancelled policies-keep for 7 year
- Claims-keep for 6 years after settlement
Legal Documents-Personal or Business, keep indefinitely. Be sure to keep hard copies in a fireproof and waterproof safe or safe deposit box.
When in doubt, DON’T throw it out! With today’s digital age, it’s a lot easier to retain documents for longer periods of time since it doesn’t take up physical space. Keep in mind though, you will need to remember to move the files if you have them stored on your local computer and you upgrade to a new computer. You could also save everything to an external hard drive to save the hassle.
This is just an overview of document retention. You can do a search and find more detailed information. And you will notice that different sites may have different retention times. Which is why, when in doubt…
Other important things to remember:
- Safeguard your information. If digital, keep it password protected if it has your SSN/bank account/credit card information on it. If paper, keep in a secure place at your home-don’t leave at the office where anyone could access it.
- When disposing of physical documents, be sure to shred the documents that have SSN/bank account/credit card information on them. Do NOT throw them in the trash.
- Credit card offers in the mail-be sure to shred them as well-do NOT throw in the trash.
- Passwords-don’t use the same password for everything. If a hacker gets your email and password and it’s used for all of your logins, they will have access to everything.
- Get ID Theft Insurance-it covers the cost of having their company deal with your ID theft issues, which can take on average 100-200 hours!
- Do NOT send any personal information that has SSN/bank account/credit card information on it through regular email. If anyone ever asks you to email sensitive information, ask them for a secure method. Any company that deals with sensitive data will have an alternative method that is secure. If they don’t, you do not need to be doing business with them.