PROTECTING YOUR BUSINESS

-Eric Swick, CPA & president of Payroll Specialists, LLC / Swick & Associates, Inc.

One of the most common questions I receive from clients has to do with how long they need to keep certain records or documents. There is no question that there is a lot of documentation created in the small business environment, especially in restaurants. Well your friends at the Federal, State and local government agencies have an expectation of how long you need to retain much of this documentation. We have been seeing a rise in the frequency of local audits due to so many of these municipalities in need of raising revenue.

Taxpayers who are subject to the federal income tax or who are required to file informational returns with the Internal Revenue Service, must keep accurate records. In the event your return is audited, the auditor will expect you to substantiate the revenue and expenses reported on the return with proper accounting documentation. Generally, no penalty is imposed for failure to keep the required records. However, in case of a dispute with the IRS, the burden of proof is on the taxpayer. Incomplete or nonexistent records may result in interest, penalties and loss of legitimate deductions.

Below you will find a guide that provides suggested retention times for specific types of records. It is prepared based on information published by the American Institute of Certified Public Accountants. However, it is not all inclusive. Please note that Colorado’s retention time is longer than the Federal requirements on certain items. For questions about specific applications you can contact us directly.

While this list seems some what overwhelming, we feel it is better to be safe rather than sorry by keeping the required documentation. There have been several times in audits, such as a sales tax audits, where this has proven very beneficial.

PERMANENT RETENTION PERIOD **

Audit Records & Reports
Canceled Checks for Taxes, Property Purchases and Contracts
Charts of Accounts
Contracts & Leases (in effect)
Copyrights, Patents and Related Papers
Corporate Stock and Bond Records, Charters, Bylaws, Corporate Meeting Minute Books, Transfer Registers, Options, etc.
Current Insurance Records, Claims, Policies, etc.
Financial Statements (year-end, others are optional)
Fixed Asset Records and Depreciation Records and Schedules
General Ledger and Journals
Income and other Tax Returns & Supporting Documentation
Real Estate Records (Deeds, Mortgages, Appraisals by Outside Appraisers, Bills of Sales, ect.)
Retirement and Pension Records
Tax and Legal Correspondence

SEVEN YEARS RETENTION PERIOD **

Accident Reports / Settled Insurance Claims
Canceled Checks (exceptions noted above)
Canceled Stock & Bond Certificates and Expired Option Records
Employee Earnings Summaries and Payroll / Personnel Records
Expense Reports, Analysis, Distribution Schedules and Payment Vouchers
Expired Contracts, Mortgages, Notes and Leases
Garnishments
Group Disability and other Insurance Safety Reports
Inventory Records of Products, Materials and Supplies
Invoices to Customers and from Suppliers
IRS Form 8300: Report on Cash Transactions Over $10,000 Received in a Trade or Business
Plant Cost Ledgers and other Cost Accounting Records and Reports
Purchase Orders, Shipping & Receiving records and related correspondence
Sales Records
Scrap and Salvage Ledgers
Subsidiary Ledgers and Schedules for Accounts and Notes Payable and Accounts and Notes Receivable
Voucher Registers and Schedules
Withholding Tax Statements

THREE YEARS RETENTION PERIOD / FOUR YEARS FOR COLORADO **

Bank Statements and Deposit Slips
Employment Applications
Expired Insurance Policies
Internal Audit Reports
Internal Reports (misc. financial)
Payroll Time Sheets or Cards
Petty Cash and Cash Paid-Out Vouchers
Physical Inventory Tags and Control Records
Records in Support of Customer Guarantees and Warranties
Sales Commission Reports

TWO YEARS RETENTION PERIOD **

Bank Reconciliation’s
Duplicate Deposit Slips
General Business Correspondence

** Retention time is measured from the later of the tax return due date or filing date, plus any amendment or extension date.

If you have suggestions or comments, please feel free to contact Swick & Associates, Inc. by visiting our web site at www.swickco.com or call us at 303-987-1700.

Eric Swick is president of Payroll Specialists, LLC and Swick & Associates, Inc, located in Denver, Colorado specializing in payroll and accounting.

Client Center

- Payroll Entry
- Web Employee Login

Go Mobile!

...and get what you need, when and where you need it!

Phone: 303.987.1700 • Fax: 303.987.1829
Email: contact@swickco.com