We have had a number of client inquiries recently regarding how long to keep financial documents. The answer is that it depends on the type of documents you are planning to purge. Record retention policies should be determined based on the functional area within the organization, such as:
Real property records
Retention periods vary, depending upon the functional area, regulatory agencies, and the countries and jurisdictions where the data is stored. There are no definitive answers to how long each type of record must be kept, but some questions you might consider in making these decisions include:
Do you anticipate any litigation? If so, do you have data that may be subject to these requirements?
Do you have Sarbanes-Oxley or financial reporting requirements that specify retention requirements?
Do you have Human Resources, HIPAA or other privacy requirements?
Are there regulatory agencies that cover your industry (e.g., OSHA, FDA, etc.) that have specific retention requirements?
Do you keep records of customer service claims or warranties?
Do you keep intellectual property, trade secrets, patents or other intellectual capital records?
The American Institute of Certified Public Accountants (AICPA) published the chart below to serve as a guideline. It is encouraged however to keep the considerations above in mind when determining when it is appropriate to purge:
We support keeping copies of all of your tax returns indefinitely; and retaining all workpapers supporting tax return line items for AT LEAST 4 years since the IRS can audit a tax return any time within 3 years from the date it is filed. (Assuming your 2010 tax return was filed in 2011, the IRS can audit it at any point through 2014. Therefore at this point, you’d be safe purging tax related data documents for years prior to 2009.)
Based on the retention requirements for tax preparers, ECS is not required to keep tax returns and other data indefinitely. As a result, our retention policy at ECS is 7 years for all documents. Based on this policy, we are currently retaining electronic copies of client information going back much further than is required of us, and are planning to purge older data from our servers on or about October 1, 2014. At this time, we will begin purging all documents (including tax returns) for years prior to 2006. If you feel we may have copies of records that you do not have, and would like to request copies for your files prior to our purge, please call your contact at ECS prior to October 1st to make arrangements for transferring those files. The files can be burned to a CD and mailed to you, or easily transferred to our client portal system for your retrieval. If you haven’t already taken advantage of our client portal please contact Lori at email@example.com and she will send you the information to easily get you set up.
2014 Tax Due Dates:
August 31st –
Monthly Illinois wage report for July due (employers with 25 or more employees)
September 15th –
3rd estimated tax payments for 2014 due for Individuals and Corporations
Extended C and S – Corporation income tax returns due