As a small business owner, you’re not exactly flush with free time. It’s tempting to push document retention aside, reasoning “I’ll do it later” — only to find that the “later” you promised yourself never arrives. If you can see a reason why you might need a document in the future, then hang onto it.

• Records related to fixed asset purchases must also be maintained for tax reporting (including figuring depreciation), balance sheet reporting, and maintenance schedules.
• Any business or entity who voluntarily choose to make tax-relevant records available despite not being obligated to do so, are also required to follow document retention periods.
• Your recordkeeping system should include a summary of your business transactions.
• 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.
• Typically, you must keep business records for three years and employment tax records for at least four years.
• Common wisdom suggests we keep important papers for seven years, for reasons that, we vaguely recall, have something to do with taxes.

More In File

Different agencies have different record retention requirements. And in addition to this, there are other record-keeping requirements for your small business. One of the benefits of keeping electronic Grocery Store Accounting records is that you don’t have to store piles of receipts in a filing cabinet.

• Contact your local authority or license issuer for information on retention periods.
• Whether you have digital or paper records, you must store them in a way that prevents any change or damage to them.
• Using a professional document management company is a great way to keep all of your documents stored safely and securely destroyed when the time comes.
• Barbara Weltman is the founder of Big Ideas for Small Business, Inc., which publishes Idea of the Day.
• In this case, the Uniform Preservation of Private Business Records Act (UPPBRA) is a good guideline.

When does the retention period begin?

HMRC will fine £3,000 pounds and remove an individual from the position of company director if they are found to be negligent with documents. Whether you are an owner, engineer, construction manager, general contractor, or subcontractor, record-keeping is one of the most often overlooked, but critical functions of the business. Every business should have a comprehensive, carefully considered record retention policy, drafted with input from human resources, information technologies, operations management, and legal counsel. The following is an industry-specific guide to the why and how of creating a record retention policy suited to your company. Whether you’re facing an audit, filing an amended return, or simply trying to declutter, having the right documents on hand can make all the difference.

• Your Bench bookkeeping team automates your financial admin, connecting bank accounts, credit cards, and payment processors to import information into our platform.
• Sure, you could fire up your home shredder and hope it doesn’t jam halfway through—but why not make life easy?
• If you can see a reason why you might need a document in the future, then hang onto it.
• Keeping tax returns and other records for the appropriate period allows your business to respond to information requests, including tax audits.
• Generally, you must keep all required records and supporting documents for a period of six years from the end of the last tax year they relate to.
• While many businesses are moving toward paperless systems, it doesn’t feel that way when you look at the piles of financial papers in your home.
• Use the Australian Taxation Office’s (ATO’s) free tool to check which records your business needs to keep and how well you’re keeping them.

How Long Should You Keep Employment Tax Records?

There are a few different options when it comes to getting rid of old paper records. A paper shredder is one convenient option, but it can take a lot of time and effort to shred old documents. Organizing your physical and cloud-based storage and developing a DRP is the best way to ensure your organization complies with recordkeeping standards. Review all guidelines carefully and come up with a plan that’s easy to implement and stick with. And so, at a minimum, keep those records “for three years from the how long to keep business documents date you filed your original return, or two years from the date you paid the tax, whichever is later,” he said. For more information on electronic record keeping, see Information Circular IC05-1, Electronic Record Keeping, and GST/HST Memorandum 15.2, Computerized Records.

If you keep your records on servers located outside Canada, you must access the servers or arrange for your staff to access the servers and provide the electronic system records required by CRA officials. This period starts from when you either got the records or completed the transactions or actions they relate to, whichever is later. Your digital options include accounting software, web-based systems and spreadsheets.

Don’t forget about all those digital documents sitting on hard drives or cloud storage! The same principles apply—make sure you know when to securely delete files that contain sensitive information. As tempting as it may be to toss everything once the IRS says you don’t need to keep it, you might want to think twice. Your insurance company or creditors may require that you hold onto things for a little longer. There’s no need to keep piles of paper or shoeboxes of receipts lying around. You can use an electronic record-keeping system to keep things organized.

• A paper shredder is one convenient option, but it can take a lot of time and effort to shred old documents.
• In today’s digital age, both paper and electronic records are acceptable forms of documentation.
• Many financial institutions and businesses now let you opt for electronic billing and statements, either through email or online account access.
• “Keep a digital copy if you are worried about never having access again,” she said.
• Along with all documentation, you should also make note of the written explanation of the business purpose.

After that, you can destroy the supporting documents but keep your business tax returns permanently. You may need them net sales to prepare future tax returns or for other purposes. The IRS recommends keeping federal tax returns and supporting documents for at least three years. However, this period can extend up to seven years in cases involving unreported income, bad debt deductions, or worthless securities. Many CPA firms and other tax practitioners retain tax records for seven years, though some keep them indefinitely in digital storage.