File Retention and Record Keeping Best Practices
Here’s a question my clients often ask me: “How long do I need to keep copies of tax returns and other business records?”
I understand that in today’s business climate, keeping paper files is cumbersome and even considered a higher security-risk practice for most companies. However, with the relative ease and affordability of encrypted and secured cloud storage, it is also possible for businesses to hold onto old records indefinitely. So, the question remains, how long should you hold onto your files and customer information?
In general, we advise our clients to hold onto tax records for as long as the statute of limitations for auditing those returns remains open. In most cases, this means a term of three years. However, in certain cases, taxing authorities may audit returns going back as far as six years. In other, even more rare instances, the statute of limitations can be open indefinitely.
Another thing to consider is retaining the underlying documents supporting a tax filing for as long as they remain relevant. For instance, if you are depreciating a capital asset over a course of ten, fifteen, or twenty years, retaining records of the original asset purchase for the entirety of the depreciation period is advisable.
Other types of customer and business information may require longer or shorter retention periods. We can work with you to design and review your business’s record retention policy to ensure compliance with federal, state, and local laws. Record retention isn’t just a best practice, its also good business hygiene.
The information provided herein should not be relied upon as legal advice. Your receipt of this information does not create an attorney-client relationship between you and Shmuel Law Group, LLC. Any advice provided herein should be discussed between you and your legal and tax advisers and applied to your individual circumstances prior to your acting on it. In certain jurisdictions, this publication may constitute attorney advertising.
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