While businesses are required to keep records, individuals need to be mindful of specific information which should be retained as well. Just a few important reasons to make good recordkeeping a habit are listed below:

• To monitor the progress of your business or personal activities
• To prepare your financial statements
• To identify sources of your income
• To keep track of your deductible expenses
• To keep track of basis in property
• To prepare your tax returns
• To support items reported on tax returns and other documents

Most people fall into two categories. Either they have kept everything that they’ve ever done for as long as they can remember or they get rid of as much as they can as soon as possible, sometimes eliminating something that they will later need. The following retention periods are recommended to help you find that middle ground for individual and business purposes. However, these are only partial lists and should be sued for support and informational guidelines.

INDIVIDUAL RECORD RETENTION PERIODS

Permanent Records

• Birth Certificates
• Correspondence – Legal and important matters
• Custody agreements
• Death certificates
• Divorce papers
• Retirement and pension records
• Employment taxes for household employees (records and returns)
• Existing insurance records
• IRA contributions
• Marriage certificates

Two Years

• Bank reconciliations
• Duplicate deposit slips
  

Four Years

• Insurance policies which have expired

Six Years

• Bank statements
• Credit card statements
  

Seven Years

• Home and home improvements – including closing papers, purchase and sales invoices, proof of payment, insurance papers, Form 2119
• Cancelled stock and bond certificates
• K-1’s from partnerships, trusts, S-corps

BUSINESS RECORD RETENTION PERIODS

Permanent Records

• Appropriate ledger and related end of year trial balances
• Cancelled checks for payment of taxes, purchase of property, and in payment of important contracts should be retained permanently with the papers in these files
• Depreciation schedules
• Capital stock and bond records: Ledgers, transfer registers, stubs showing issues and record of interest coupons
• Cash books (receipts and disbursement journals
• Deeds, mortgages, and bills of sale, contracts and leases in effect
• Employment taxes (records and returns, including withholding statements)
• Financial statements – Year end (others optional)
• General and private ledgers, and related end of year trial balances
• Insurance records (existing)
• Minute books of directors and stockholders, by-laws
• Patents and related papers
• Property appraisals by outside appraisers
• Property ledgers – including costs, depreciation reserves and end of year trial balances
• Tax returns and worksheets, Revenue Agent’s reports and other documents relating to determination of tax liability
• Trade mark registrations
  

One Year

• Correspondence of unimportant nature with customers or vendors
• Purchase orders (except purchasing department copies)
• Receiving sheets
• Requisitions
• Stenographers’ note books
• Stockroom withdrawal forms
  

Three Years

• Employment applications
• General correspondence
• Internal audit reports, including working papers
• Miscellaneous internal reports
• Petty cash vouchers
• Physical inventory tags
  

Four Years

• Insurance policies which have expired

Seven Years

• Accident reports
• Accounts receivable ledgers and related trial balances
• Bank statements
• Bank reconciliations
• Cancelled checks (see exception under permanent records)
• Contracts and leases expired
• Duplicate deposit slips
• Expense analyses and expense distribution schedules
• Garnishments
• Inventory summaries of product, materials and supplies
• Invoices to customers and from vendors
• Journal vouchers
• Notes receivable ledgers and related trial balances
• Payroll records and summaries, including payments to pensioners
• Personnel files (terminated)
• Purchase orders (purchasing department copies)
• Sales records
• Scrap salvage records – Inventories, sales, etc.
• Subsidiary ledgers to the general ledger and related trial balances
• Time books
• Voucher register and related trial balance

Written by Bunny Warren