| GARRISON & ASSOCIATES, Inc. Tax & Accounting |
Record Retention GuidelinesDifferent for every business and person Legal requirements Individual needs Business needs vary Sarbanes Oxley? Cautionary Note Regarding Sarbanes-OxleyThe Sarbanes-Oxley Act of 2002 created record retention requirements that apply to all companies, whether or not publicly traded. For example, Section 802 provides that it is a crime for someone to intentionally destroy, alter, mutilate, conceal, cover up or falsify any records, documents or tangible objects that are involved in (or could be involved in) a U.S. government investigation or prosecution of any matter or in a Chapter 11 bankruptcy filing. Section 1102 expanded the existing statute regarding obstruction of justice to make it a crime to corruptly alter or destroy a record, document or other object, “with the intent to impair the object’s integrity or availability for the use in an official proceeding.” The penalty for violating either Section 802 or Section 1102 is a fine, imprisonment for not more than 20 years or both. These sections apply not only to hard copies of all documents but also to e-mail, voice mail, PDAs and other forms of electronic hardware and software. Therefore, it is recommended that record retention policies specifically refer to these types of tools. Your company's record retention policy should provide that the (otherwise permissible) destruction of a document or documents cease immediately upon any indication of impropriety or threat of a federal investigation or proceeding. You should also have a procedure in place to notify all employees promptly of the existence of any such event. It is also recommended that you have a “point person” to field questions from employees and to communicate specific requirements and instruction, including, when necessary, the instruction to cease destruction of documents. Accounting RecordsLearn more about our accounting records scanning services Auditors’ report and annual financial statements - Permanent Bank reconciliations - 7 years Bank statements and deposit slips - 7 years Budgets - 2 years Cancelled checks (general, payroll, payroll-related taxes) - 7 years Cancelled checks (fixed assets and income taxes) - Permanent Cash disbursements journal - Permanent Cash receipts journal - Permanent Correspondence - 3 years Currency transactions reports - 5 years Dividend checks - Permanent Employee expense records - 7 years Fixed assets records (invoices, depreciation schedules) - Permanent Financial statements (annual) - Permanent Freight bills - 4 years General ledgers and year-end trail balances -Permanent Inventory records - 7 years Open accounts (MI) - 6 years Petty cash vouchers - 4 years Production and sales reports - 7 years Promissory notes (MI) - 6-10 years Purchase journals - Permanent Purchase orders - 7 years Subsidiary ledgers (accounts receivable, accounts payable, etc.) - 7 years Administrative and Corporate RecordsAnnual reports 6 years Articles of incorporation (and any amendments) Permanent Ballots and proxies 6 years Buy-sell agreements Permanent By-laws Permanent Capitol stock and bond records Permanent Contracts and leases (after expiration) 7 years Copyright and trademark records Permanent Dividend registers Permanent Government contracts and subcontracts At least 3 years Insurance records, policies, etc. Permanent Legal correspondence Permanent Liquidation of subsidiaries records Permanent Mergers and combinations records (antitrust) Permanent Minutes Permanent Mortgages and notes (after expiration) 6 years Oral contracts memorandum (MI) 6 years Patents and patent licenses 26 years Partnership agreements Permanent Real estate title documents (MI) 15 years Reorganization records Permanent Securities offer or sales records Permanent Stock certificates and ledgers Permanent Union (labor) contracts Permanent Personnel Records§6047(b) trust or retirement plan contribution Until distributed Collective bargaining agreements 6 years Employment application (from date of termination) 3 years Employee files (current employees) Permanent Employee files (after termination) 7 years Employee manuals/handbooks Permanent FICA records 4 years FMLA documents 3 years Form I-9 Employment Eligibility Verification (after date of hire) 3 years H-1B labor conditions application public access file 1 year after expiration Paychecks, W-2 Forms, W-4 Forms, 1099 Forms 7 years Payroll records 7 years Preparer information 3 years Time cards and daily time reports 4 years Unemployment insurance (MI) 6 years Wage and hour records 5 years Workers’ compensation (MI) 2 years Employee Benefit PlansDocuments filed subject to Labor-Management Reporting and Disclosure Act of 1959 5 years ERISA plan documents 6 years Pension/profit-sharing informational returns (Form 5500) Permanent Plan and trust agreements Permanent IRS approval letter Permanent Actuarial reports Permanent Tax RecordsBusiness income tax 6 years Cigarette and tobacco tax 4 years Employment security tax 4 years Federal income tax 6 years Financial reports (annual) Permanent Financial statements 4 years Payroll tax returns Permanent Sales and use tax Permanent Individual RecordsTax returns, W-2, 1099 (after filing) 6 years Loan records (after payoff) 6 years Medical bills (after payment) 6 years Insurance policies (after expiration) 6 years IRA records (after termination) 6 years Major purchase receipts 6 years Schedule K-1 (after disposition of interest) 6 years Internal Revenue CodeUnder the Internal Revenue Code, the following records are subject to the “materially” rule for determining retention time. The general requirement is that records must be kept as long as the contents may become material in the administration of any internal revenue law. Consult with legal counsel for suggested retention periods: Employer accident and health records Pension, annuity, stock bonus, profit sharing records or other plans of deferred compensation Supplemental unemployment benefit trust records Travel, transportation, entertainment and other business expense records Records of depreciation of property Records of property held for the production of income Inventory records Records of expenditures through trademarks and tradenames treated as deferred expenses Records of intercompany transactions between members and an affiliated group Records of deductions for dividends paid (including cancelled dividend checks and receipts from shareholders acknowledging a payment) — all recommended to be kept indefinitely DISC corporation records sufficient to establish details of transactions Records relating to corporate organization and reorganization Transfer of property to the corporation controlled by the transferor Permanent records of tax treatment of corporate reorganizations Records pertaining to §1244 stock shareholders and S corporation shareholders Reports required under the Tax Equity and Fiscal Responsibilities Act (TEFRA), including brokers reports, state refunds, trade or business payments and tip income Records sufficient to establish the details of the required pension withholding under TEFRA Records relating to property for which basis must be determined to compute gain or loss upon disposition, depreciation, amortization or depletion — should be retained at least until a taxable disposition is made |
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