Record Retention Guideline






April 15 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail?

Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the “three-year law” and leads many people to believe they’re safe provided they retain their documents for this period of time.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, use the following guidelines.

Business Documents To Keep For One Year

  • Correspondence with Customers and Vendors
  • Duplicate Deposit Slips
  • Purchase Orders (other than Purchasing Department copy)
  • Receiving Sheets
  • Requisitions
  • Stenographer’s Notebooks
  • Stockroom Withdrawal Forms

Business Documents To Keep For Three Years

  • Employee Personnel Records (after termination)
  • Employment Applications
  • Expired Insurance Policies
  • General Correspondence
  • Internal Audit Reports
  • Internal Reports
  • Petty Cash Vouchers
  • Physical Inventory Tags
  • Savings Bond Registration Records of Employees
  • Time Cards For Hourly Employees

Business Documents To Keep For Six Years

  • Accident Reports, Claims
  • Accounts Payable Ledgers and Schedules
  • Accounts Receivable Ledgers and Schedules
  • Bank Statements and Reconciliations
  • Cancelled Checks
  • Cancelled Stock and Bond Certificates
  • Employment Tax Records
  • Expense Analysis and Expense Distribution Schedules
  • Expired Contracts, Leases
  • Expired Option Records
  • Inventories of Products, Materials, Supplies
  • Invoices to Customers
  • Notes Receivable Ledgers, Schedules
  • Payroll Records and Summaries, including payment to pensioners
  • Plant Cost Ledgers
  • Purchasing Department Copies of Purchase Orders
  • Sales Records
  • Subsidiary Ledgers
  • Time Books
  • Travel and Entertainment Records
  • Vouchers for Payments to Vendors, Employees, etc.
  • Voucher Register, Schedules

Business Records To Keep Forever

While federal guidelines do not require you to keep tax records “forever,” in many cases there will be other reasons you’ll want to retain these documents indefinitely.

  • Audit Reports from CPAs/Accountants
  • Cancelled Checks for Important Payments (especially tax payments)
  • Cash Books, Charts of Accounts
  • Contracts, Leases Currently in Effect
  • Corporate Documents (incorporation, charter, by-laws, etc.)
  • Documents substantiating fixed asset additions
  • Deeds
  • Depreciation Schedules
  • Financial Statements (Year End)
  • General and Private Ledgers, Year End Trial Balances
  • Insurance Records, Current Accident Reports, Claims, Policies
  • Investment Trade Confirmations
  • IRS Revenue Agents. Reports
  • Journals
  • Legal Records, Correspondence and Other Important Matters
  • Minutes Books of Directors and Stockholders
  • Mortgages, Bills of Sale
  • Property Appraisals by Outside Appraisers
  • Property Records
  • Retirement and Pension Records
  • Tax Returns and Worksheets
  • Trademark and Patent Registrations

Personal Documents To Keep For One Year

  • While it’s important to keep year-end mutual fund and IRA contribution statements forever, you don’t have to save monthly and quarterly statements once the year-end statement has arrived.

Personal Documents To Keep For Three Years

  • Credit Card Statements
  • Medical Bills (in case of insurance disputes)
  • Utility Records
  • Expired Insurance Policies

Personal Documents To Keep For Six Years

  • Supporting Documents For Tax Returns
  • Accident Reports and Claims
  • Medical Bills (if tax-related)
  • Sales Receipts
  • Wage Garnishments
  • Other Tax-Related Bills

Personal Records To Keep Forever

  • CPA Audit Reports
  • Legal Records
  • Important Correspondence
  • Income Tax Returns
  • Income Tax Payment Checks
  • Property Records / Improvement Receipts (or six years after property sold)
  • Investment Trade Confirmations
  • Retirement and Pension Records

Special Circumstances

  • Car Records (keep until the car is sold)
  • Credit Card Receipts (keep until verified on your statement)
  • Insurance Policies (keep for the life of the policy)
  • Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
  • Pay Stubs (keep until reconciled with your W-2)
  • Sales Receipts (keep for life of the warranty)
  • Stock and Bond Records (keep for 6 years beyond selling)
  • Warranties and Instructions (keep for the life of the product)
  • Other Bills (keep until payment is verified on the next bill)
  • Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)

 

Tax Rates (we may want this out)

2011 Tax Rates

2011 Tax Rates Schedule X – Single

If taxable income is over —

But Not Over —

The Tax is:

$0

$8,500

10% of the taxable amount

$8,500

$34,500

$850 plus 15% of the amount over $8,500

$34,500

$83,600

$4,750 plus 25% of the amount over $34,500

$83,600

$174,400

$17,025 plus 28% of the amount over $83,600

$174,400

$379,150

$42,449 plus 33% of the amount over $174,400

$379,150

no limit

$110,016.50 plus 35% of the amount over $379,150

2011 Tax Rates Schedule Y-1 – Married Filing Jointly or Qualifying Widow(er)

If taxable income is over —

But Not Over —

The Tax is:

$0

$17,000

10% of the taxable amount

$17,000

$69,000

$1,700 plus 15% of the amount over $17,000

$69,000

$139,350

$9,500 plus 25% of the amount over $69,000

$139,350

$212,300

$27,087.50 plus 28% of the amount over $139,350

$212,300

$379,150

$47,513.50 plus 33% of the amount over $212,300

$379,150

no limit

$102,574 plus 35% of the amount over $379,150

2011 Tax Rates Schedule Y-2 – Married Filing Separately

If taxable income is over —

But Not Over —

The Tax is:

$0

$8,500

10% of the taxable amount

$8,500

$34,500

$850 plus 15% of the amount over $8,500

$34,500

$69,675

$4,750 plus 25% of the amount over $34,500

$69,675

$106,150

$13,543.75 plus 28% of the amount over $69,675

$106,150

$189,575

$23,756.75 plus 33% of the amount over $106,150

$189,575

no limit

$51,287 plus 35% of the amount over $189,575

2011 Tax Rates Schedule Z – Head of Household

If taxable income is over —

But Not Over —

The Tax is:

$0

$12,150

10% of the taxable amount

$12,150

$46,250

$1,215 plus 15% of the amount over $12,150

$46,250

$119,400

$6,330 plus 25% of the amount over $46,250

$119,400

$193,350

$24,617.50 plus 28% of the amount over $119,400

$193,350

$379,150

$45,323.50 plus 33% of the amount over $193,350

$379,150

no limit

$106,637.50 plus 35% of the amount over $379,150

2011 Tax Rates Estates & Trusts

If taxable income is over —

But Not Over —

The Tax is:

$0

$2,300

15% of the taxable amount

$2,300

$5,450

$345 plus 25% of the amount over $2,300

$5,450

$8,300

$1,132.50 plus 28% of the amount over $5,450

$8,300

$11,350

$1,930.50 plus 33% of the amount over $8,300

$11,350

no limit

$2,937 plus 35% of the amount over $11,350

Social Security 2011 Tax Rates

Base Salary

$106,800

Social Security Tax Rate

4.2%

Maximum Social Security Tax

$4,485.60

Medicare Base Salary

Unlimited

Medicare Tax Rate

1.45%

Education 2011 Tax Rates

American Opportunity Tax Credit

$2,500

Lifetime Learning Credit

$2,000

Student Loan Interest Deduction

$2,500

Coverdell Education Savings Contribution

$2,000

Miscellaneous 2011 Tax Rates

Personal Exemption

$3,700

Business Equipment Expense Deduction: Used

$500,000

Business Equipment Expense Deduction: New

$2,000,000

Prior-year safe harbor for estimated taxes of higher-income

110% of your 2010 tax liability

Standard mileage rate for business driving

51 cents

Standard mileage rate for medical/moving driving

19 cents

Standard mileage rate for charitable driving

14 cents

Child Tax Credit

$1,000

Unearned income maximum for children before kiddie tax applies

$950

Maximum capital gains tax rate for taxpayers in the 10% or 15% bracket

0%

Maximum capital gains tax rate for taxpayers above the 15% bracket

15%

Capital gains tax rate for unrecaptured Sec. 1250 gains

25%

Capital gains tax rate on collectibles

28%

Maximum contribution for Traditional/Roth IRA

$5,000 if under age 50

$6,000 if 50 or older

Maximum employee contribution to SIMPLE IRA

$11,500 if under age 50

$14,000 if 50 or older

Maximum Contribution to SEP IRA

25% of compensation up to $49,000

401(k) maximum employee contribution limit

$16,500 if under age 50

$22,000 if 50 or older

Self-employed health insurance deduction

100%

Estate tax exemption

$5,000,000

Annual Exclusion for Gifts

$13,000