There are actually governmental rules which dictate how long business records of companies may be kept. So, you’ll need to follow these rules in order to stay within the law. Typical company records include lots of important data. For example, records will show how much a company owes in taxes, how it hired staff members, whether it’s compliant with rules and so on. How long records must be kept does depend on certain variables. It depends on which types of records are kept, as well as on time limitations for the activities in question, which are described by the documents or substantiated by the documents.
In America, the IRS requires companies to hang on to tax returns of the business type, as well as to supporting documentation, for at least three years after tax returns are filed. During this timeframe, tax returns may be audited or amended. However, if a company fails to report monies earned as it should, the Internal Revenue Service has the power to look into the matter for six years or less. In cases where companies took deductions for valueless securities or bad debts, the Internal Revenue Service is able to investigate for seven years or less.
Since the IRS does have broad powers, it’s safe to keep records which relate to taxes in files which are permanent. If this isn’t feasible, keeping them for seven years is strongly recommended. There’s always a chance that those records will be needed and not having them may end up causing big problems.
Payroll tax records, which include tax returns for employment, documents which substantiate related matters and tax payment withholding data should be kept for four years, minimum, past the dates when returns were formally filed. Keeping payroll records for this time frame is important and you should keep everything, including time sheets, fringe benefit payment data and employee data. If it’s connected to paying your staff, hang onto it for four years.
When it comes to HR records, which include job applications, performance reviews, personnel files and job testing data, seven years is the time frame for record retention. If an employee suffered an injury in the workplace, consider holding on to his or her HR records for a full decade. This is because the employee may sue for up to ten years, via a claim of the civil type.
Your financial/operation records should be held onto for seven years. Examples of this type of data include sales tax collection information or records which are related to business obligations within the jurisdiction.
Ownership records should be kept in a safe place forever. They should never be destroyed or be far out of reach.
Create a Plan Today
Now that you know the hard facts about how long you should keep business records, isn’t it time to create a plan for storing these records? We’ve covered all of the bases here for you, so that you’re able to access the important information that you need, and then take good care of your records for the right amounts of time.