Businesses must maintain records so that an accounting of the business activities may be conducted. Whether it be for an audited financial report, a tax return, or a specific management report, businesses must have accesss to their book of records.
The big question is just how long must business records be retained.
1. Tax Returns. Keep them for 7 years. The IRS has 3 years from your filing date to audit your return if it suspects good faith errors. Six years to challenge it if it thinks you under-reported your gross income by 25 % or more.
2. IRA Contributions. Keep them permanently.
3. Retirement/Saving Plan Statements. Keep the quarterly statements from 401(K) and other plans until you receive the annual. If it all adds up, shred the quarterly and keep the annual until you retire or close the account.
4. Bank Records. Go through them and only keep those checks related to taxes, business expenses, home improvements or mortgage payments. Shred the rest.
5. Brokerage statements. Keep them until you sell the securities.
6. Bills. Go through your bills once a year. Only keep those for big purchases i.e. jewelry, cars, appliances, furniture and computers etc. for proof in case of loss or damage.
7. Credit card receipts and statements. Keep your original receipts until you get your monthly statement – shred the former if both add up. Keep the statements for seven years only if tax related expenses are documented.
8. Paycheck Stubs. Keep them for one year once you’ve verified all the info on your W-2 form is accurate
9. House/Condo records. Keep from six years to permanently. Keep all records documenting purchase price, permanent improvements and expenses incurred during buying and selling. Holding on to evidence of improvements is important as it adds to your original house cost and can mean a greater profit (capital gains) if/when you sell the house.
10. Buy a good cross cut shredder and use it once a week
This information has been provided by contributing editor Judith Heft of Judith Heft & Associates located at 34 Fifth Street in Stamford, CT. Judy Heft is a financial organizer, bookkeeper, and much more. For more information head to her website and Simplify Your Life.
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