What Financial Records Should You Keep And For How Long?

With the week of September 17 having been designated as “National Love Your Files Week” we wanted to pass along information on which files/records to love and keep and for how long. As accountants we understand the need to not only properly keep and store records, but the need to get rid of paperwork that is no longer necessary.

While we never advocate the “shoebox” method of record keeping, as a small business owner you need to find a system that works best for you. Keeping accurate records can literally make the difference between success and failure in a business – if you don’t know how much you’re making how will you properly prepare for the future?

Here are some guidelines on record keeping, check with your accountant to determine the exact guidelines for your particular state or industry:

Bills: If the bills are for purchases you made and if you don’t have other proof of payment (cancelled check) you will want to keep them for one year. For big ticket items (computers, furniture) keep the bills as long as you own the item.

Brokerage statements: These statements should be kept until you divest yourself of the stocks. Once they’re sold, the supporting documents will need to be filed with your tax return and that information should be retained with the return.

Credit card statements: Credit card receipts should be kept and reconciled monthly. The receipts can be destroyed once it’s reconciled. The statements should be kept with your tax returns.

Homeowner records: All records relating to what it cost to buy your home and any repairs and updates should be retained as long as you own the home. Following the purchase or sale of your home, the records relating to your real estate settlements should be retained for six years.

Retirement information: 401K and retirement plan statements need to be kept for at least one year until you receive and reconcile your annual statement – then you can keep the statements only. These statements should be kept as long as you are the account holder.

Taxes: Supporting documents and tax records should be kept a minimum of three years, but it’s recommended to keep them for up to seven years. If the IRS decides to audit your business, it can request records as far back as six years. Keep W-2s along with the supporting tax documents.

Keeping the records safe is as crucial as keeping the records themselves. Consider, for security’s sake, putting the records in a fireproof safe or storing them off site. Use a safe deposit box or other off site location. Many individuals opt for scanning all documents and keeping the scanned, virtual documents offsite and keeping the paper documents in a file onsite. The storage method that works best for you is the one you’re most likely to be diligent about. Additionally, don’t toss any paperwork that contains information that could jeopardize your identity without shredding it first.

Got questions? Call the tax and accounting experts at BASC Expertise today at (480) 355-1398.

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