Record Retention

Record retention is a crucial aspect of managing a business’s documentation and compliance efforts. It refers to the policies and practices regarding how long various types of records should be kept before they are destroyed or archived. A concrete record retention policy helps reduce legal risks, improves operational efficiency, and ensures compliance with federal, state, and industry regulations.

Importance of Record Retention

  1. Legal Compliance: Different types of records are subject to specific retention requirements set forth by law. This can include tax records, employee documents, and corporate minutes. Failing to retain these records for the mandated period can lead to penalties and legal complications.

  2. Operational Efficiency: Effective record retention policies help streamline operations. By categorizing records and knowing when to dispose of outdated information, businesses can maintain a more organized and efficient workspace.

  3. Historical Reference: Records serve as a historical account of a business's activities and decisions. Keeping relevant documents can provide insights for future strategies and help address historical disputes.

  4. Data Privacy and Security: Retaining records unnecessarily can expose sensitive information to data breaches. A clear retention schedule helps minimize risks by ensuring data is destroyed securely once it is no longer needed.

Recommended Retention Periods

While retention requirements can differ based on industry and jurisdiction, here are some general guidelines:

  • Tax Records: Usually retained for at least seven years after filing, as this is the period during which the IRS can audit filed returns.

  • Employee Records: Typically retained for at least four years, though certain records may need to be kept longer.

  • Financial Statements: Retain for at least seven years, particularly if they relate to audits or claims.

  • Corporate Records: Minutes from board meetings and other corporate documents should generally be kept indefinitely.

menu_book Read more: For more information about the length of time to keep records, you can view this webpage from the IRS: How long should I keep my records?

TBC’s Record Retention Policy

In accordance with TBC’s current document retention policy we will retain copies of our work papers and your tax returns for your engagement for seven years. All your original records will be returned to you. We will provide you a copy of the depreciation schedules and tax returns and other pertinent work papers that should be a part of your books and records. After seven years our work papers, files and copies of tax returns will be destroyed.

TBC Recommends:

  • You keep your copies of your tax returns indefinitely.

  • You keep documents related to real estate and/or stock sales and purchases indefinitely.

  • You keep all documentation regarding and related to carryover losses, if you have such, indefinitely.

sticky_note_2 Please note: Physical deterioration or catastrophic events may shorten the term during which our records will be available. The working papers and files of our firm are not a substitute for your original records.

Best Practices for Record Retention

  1. Establish a Clear Policy: Develop and document a record retention policy that outlines what records are maintained, their retention periods, and the methods of disposal.

  2. Regular Review and Update: Periodically review and update the record retention policy to reflect any changes in laws or business practices.

  3. Training and Communication: Educate employees about the importance of record retention and ensure they are aware of the established policies.

  4. Secure Disposal: Implement secure methods of disposing of records once they are no longer needed to protect sensitive information.

By adhering to a comprehensive record retention strategy, businesses can better manage their documentation, mitigate risks, and ensure they are prepared for any potential legal or compliance issues that may arise.

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