By Jeannine M. Sheehan, CPA
The arrival of Spring often is a traditional time to tackle tough cleaning projects at home. It is also a good time to tackle these chores in your business or work place. If you are like most businesses, you create and save an enormous amount of information, both electronic and hardcopy. When it comes to reviewing your financial records, a plan should be developed to manage paperwork and to determine when it is safe to discard certain documents to ensure that you have the appropriate documents on hand if needed.
The Internal Revenue Service (IRS), Employee Retirement Income Security Act (ERISA), and the Uniform Commercial Code (UCC) require business record retention. There may also be other specific requirements for your type of organization and the special regulatory agencies to which you may be accountable. Some government agencies have their own record retention requirements that are not always the same as federal requirements. The following schedule may be used as a general guide for determining record retention, however should be modified to meet your organization’s unique needs and requirements.
Permanent Records
- Audit reports and end of year financial statements
- Corporate minutes, by-laws, stock records and articles of incorporation
- Deeds, mortgages, contracts and leases still in effect
- Tax Returns
- Fixed asset records and depreciation schedules
- General Ledgers and year end trial balances
- Tax and legal correspondence
- Employee personnel records (after termination)
- Insurance records, accident reports, and claims
- Chart of accounts
- Cancelled checks for important payments (taxes, property purchases, etc.)
Retain at least seven years
- Bank statements
- Accounts payable, receivable and other subsidiary ledgers
- Payroll records and summaries
- Vendor and customer invoices
- Cancelled checks not included above
- Inventory records
Retain at least three years
- General correspondence
- Employment applications
- Employee personnel records (after termination)
- Insurance policies (expired)
- Petty cash vouchers
Retain one year
- Bank reconciliations
- Correspondence with customers or vendors
- Duplicate deposit slips
- Purchase orders
It should be kept in mind when implementing your organization’s retention and disposal plan that care should be taken when disposing of documents. Some documents may contain social security numbers, bank account or other confidential information. Many states have laws requiring organizations to carefully maintain security and confidentiality when disposing of files. These laws generally require that the information be made unreadable such as by shredding. Shredding and disposal services are also an option.
Jeannine Sheehan, CPA is a senior manager with Mengel, Metzger, Barr & Co. LLP and may be reached at Jsheehan@mmb-co.com.
