December Article

Record Retention Policies – How Long Do I Need to Keep these Records?

By Kathleen M. Jackson, CPA
Novak Francella LLC, Philadelphia, PA

It’s now the end of the year.  Are your filing cabinets so full, that you can not file the new agreements for 2011?  If you answered yes, then, continue reading for some suggestions and guidelines that should be discussed in detail with your accountant and lawyer.
Most people think that records need only be kept for 3 years after the tax return has been filed.  Three years represents the statute of limitations, however, most documents must be kept for longer periods of time.
The most important decision you need to make is determining when to move records out of the office and into off-site storage.  Only truly active records should be maintained in active office space.
Business records retention is required by the Internal Revenue Service, Employee Retirement Income Security Act (ERISA) and the Uniform Commercial Code.  The Labor Management Reporting and Disclosure Act of 1959 (LMRDA) regulations require all records that support a filing be kept for 5 years.  Furthermore, ERISA regulations require that all records be kept for 7 years.  Record retention is further governed by the particular requirements of each individual business and any special regulatory agencies to which it is accountable.  Many government agencies as well as many states have their own record retention requirements, which do not always agree with the federal requirements.  
Accordingly, this schedule should be used as a guide, and modified as necessary to meet your specific needs.  However, any contemplated deletions in the permanent or six to seven year’s categories should be discussed in advance with your legal counsel and accountant.  Furthermore, we would recommend that you consult with your legal counsel and accountant regarding your specific record retention guidelines.

Permanent Records

•    Audit reports of CPA’s
•    Board of Trustees minutes, including by-laws and articles of incorporation
•    Cancelled checks for important payments, i.e. taxes, purchases of property, special contracts, etc. (checks should be filed with the papers pertaining to the underlying transaction)
•    Chart of accounts
•    Correspondence (legal and important matters only)
•    Deeds, mortgages, as well as contracts and leases still in effect
•    Financial statements – end of year
•    Fixed asset records and depreciation schedules
•    General ledgers and year end trial balances
•    Insurance records, current accident reports, claims, policies, etc.
•    Journals
•    Tax returns
•    Union agreements


Six to Seven Years

•    Accounts payable ledgers
•    Accounts receivable ledgers and trial balances
•    Bank statements
•    Cancelled checks (see exception under Permanent Records)
•    Contracts and leases (expired)
•    Expense analyses and expense distribution schedules
•    Inventory records
•    Invoices from vendors
•    Payroll records and summaries, including payments to pensioners (W-2 forms, 1099, and 941’s)
•    Personnel records after termination
•    Subsidiary ledgers to the general ledger and trial balances
•    Travel expense reports and supporting documentation
•    Vouchers for payments to vendors, employees, etc. (including allowances and reimbursement of employees, officers, etc. for travel and entertainment expenses)


Two to Three Years

•    Application for Employment
•    Employee personnel records after termination
•    General correspondence
•    Insurance policies - expired
•    Miscellaneous internal reports
•    Petty cash vouchers


One Year or Less

•    Bank reconciliation’s
•    Correspondence of unimportant nature with customers or vendors
•    Duplicate deposit slips
•    Purchase orders