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GUIDELINES

There are specific guidelines that govern how long a business must keep certain client records. Some businesses simply keep records until there is no longer sufficient space to store them, forcing the owners and staff to address the issue after it has likely become overwhelming. Which records can be destroyed? Which must be retained, and how do you go about storing them in a matter in which locating them is efficient and cost-effective? Developing guidelines to address record retention can be easier if you know the regulations that govern retention and storage of specific documents, as outlined below. 

As the use of computers for storing records becomes more secure and available, the storage of electronic files will become a major issue for businesses who wish to eliminate paper stores and reduce office space dedicated to file cabinets. There are federal guidelines issued by the Internal Revenue Service (IRS) that govern electronic file storage/retention. A business must be able to produce legible records that support and reconcile books and tax returns. Source documents in the form of machine-sensible records must be readily retrievable and contain sufficient transaction level detail to easily identify them. In addition, there are more specific guidelines that cover the documentation of procedures, the contents of files and system checks. 

Staff (Personnel) Records

You must keep personnel records for a staff member for the duration of his/her employment with your company. Should an employee leave your firm, there are additional guidelines regarding how long records should be kept after the termination date. See our chart to review specific guidelines for this situation. 

Corporate Records

Items such as by-laws, articles of incorporation, board minutes and stock records must be considered permanent records and thus kept indefinitely.

Accounting and Tax Records

Supporting documents for tax returns should be kept in a secure and readily available location at all times; this would include items such as records that support a company's income, expenses and tax credits reported on each income tax return until the statute of limitations period for such documents expires. The IRS can audit a tax return for a period of three (3) years after the date on which it was due or the date the tax was actually paid, whichever is later. Be aware though, if a company underreports a large sum of income, the IRS can audit for a period of six (6) years after the due date (or nearly seven (7) years after the tax year). In light of this, it is wise to keep tax records for a period of seven (7) years.

Employee Benefits Plan Records

Should a filing under ERISA be made all documentation/supporting documents necessary for verification of any aspect of the filing must be retained for a period of six (6) years after the filing date Such documentation will vary based on the plan, but, the minimum should be the basic information that would verify the accuracy and completeness of all required disclosures and the Annual Report. Such records would be brokerage or trustee statements supporting the investment experience of the plan, payroll and related data to support eligibility allocations and compliance testing and participant communications related to terminations, loans or designations of beneficiary.

To learn more specifics, review the chart listing specific records and their corresponding retention guidelines.

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