How Long Should I Keep Those Business Documents?

How Long Should I Keep Those Business Documents?

– Darrell Cartwright

It’s a paper world.  In your business and even in your personal life you have documents that seem to just accumulate. When it’s spring cleaning time, do you just throw caution to the wind and throw all of them out? How about scanning all of the documents to your computer’s hard drive, hopefully backed up properly to the Cloud or to another safe location, and then destroy the underlying document?

Scanning documents and backing them up is a good option, but even then is there a period of time when you should no longer have to worry about those documents? And will you remember to scan every receipt for a purchase for a tax deductible expense or asset? How about the purchase of equipment, business property, real estate, expense items, etc.? What about your monthly bank statements, employment tax records, Form 1099’s or W2 forms, W-9’s? Although there is no one size fits all answer, here is a reasonable rule of thumb related to documents:

(1) If a document relates to a deductible expense for tax purposes, make sure you keep those records for at least three years from the date you filed your original return. The IRS has a normal three-year statute of limitations for most returns. If there is a possibility that the IRS could maintain you have a “substantial omission of gross income exceeding 25%”, then you better keep those records for a period of six years, since the statute of limitations is extended.

(2) Records that relate to the cost or capital expenditure for an asset should be kept until that asset is disposed of, plus whatever tax period may apply.

(3) Finally, some records may need to be kept indefinitely. In the event that a tax return is not filed, the statute of limitations never runs for that tax year, or if the IRS determines the tax return was fraudulent.

Those general rules of thumb are not definitive and absolute, and in some cases may be shorter or longer depending on other varying circumstances. In short, it is still a paper world, so getting accustomed to the scanning and backing up procedure may be the best solution.

1/23/2017

OUR OFFICE

100 Corporate Parkway - One Lake Level
Birmingham, Alabama 35242

Phone: 205-572-4100
Fax: 205-572-4199

Email Us

AWARDS & RECOGNITION

No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.

© 2017 Richardson Clement PC. All Rights Reserved. Website Notice