How long should you keep financial records?
This isn't another sermon on the importance of financial record-keeping. Just the opposite: It's about discarding unnecessary records to free space in your overstuffed file cabinets. But which records should you keep and which can you trash?
Tax returns and supporting data should be kept for at least seven years. Beyond that term, CPAs suggest keeping returns forever (particularly if you have tax-deferred retirement accounts); you may toss the backup materials.
Things like audit reports, financial statements, general ledgers and journals should be stored through eternity, along with legal correspondence, contracts, documents related to real estate transactions (including capital improvements) and all corporate records (from articles of incorporation to any paperwork relating to shareholders).
Six years is about the limit for keeping bank statements, deposit slips, sales records, journals and any materials relating to employee income or expenses.
Items that can be discarded after three years include canceled checks, paid invoices, payroll records, depreciation schedules, paperwork relating to expenses, donation receipts, real estate tax bills and inventory records.
You can trash the rest--if you dare.
Paul DeCeglie is a former staff reporter for Journal of Commerce and American Banker.
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