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Record Retention

Clients often inquire how long they need to keep their tax records. The short answer: at least as long as the IRS, FTB, EDD, OSHA, CDTFA, or any other entity involved is allowed by law to audit or assess taxes. Additionally, documents such as property purchase records should be kept as long as needed to appropriately calculate the taxes. Unfortunately, there is not an easy, 1-number answer to these questions, so we created this page as a guideline for organizing and retaining your records. Please note that these are only guidelines for tax-related documents. You may need to keep other documents or these same documents for longer periods of time for other purposes (e.g., legal, industry-specific regulations).

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Have a plan and be organized! If possible, organize by year, and then by category.

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You can keep paper records or digital. Some people keep everything in a box. Others use file folders/file cabinets. Many people prefer scanning or snapping pictures of documents and storing the data digitally on their computer or on a secure cloud service. If you are keeping paper records, we highly recommend keeping a digital backup. This will be easily accessible, take up no space, and can easily be shared, transferred, or updated.

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Keep your records handy and try updating throughout the year so the task doesn't seem insurmountable at the end of the year or right before you need to file your taxes!

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Identify theft is a major problem! When it comes time to destroy your old records, please shred the documents and take other precautions. Do NOT simply throw them in the trash.

Shredded Paper in Waste Basket
Piles of Paper
Personal

Personal Records

 

We recommend you keep most of your tax-related documents at least 5 years (4 years from the filing date of your tax return).

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Exception: If there is an omission of income greater than 25%, the IRS can go back 6 years. If there is an ongoing audit or indications of fraud, they can request to see records from even farther back.

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Keep 1-2 years:

  • Cancelled checks - verify before destroying

  • Paycheck stubs (W-2 will summarize the information at the end of each year)

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Keep 3 years:

  • Credit Card Statements

  • Medical Bills (if not deducting on tax returns)

  • Utility Records

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Keep 5 years:

any records to verify income, deductions, adjustments, and credits on your tax returns. Some examples include:

  • Income: W-2s, 1099s, K-1s, etc.

  • Expenses: invoices, receipts, cancelled checks, proof of payment, bank statements, wage garnishment, alimony/child support payments

  • Home: property tax, insurance records, proof of payments

  • Credits: child care expenses, education expenses, electric vehicle/solar panel receipts

  • Investments and Retirement accounts: 1099s, annual brokerage statements, Forms 5498 and 8606, annual retirement statements, 401(k) statements, 1099-R distribution records

  • Health/Medical: Form 1095-A, B, or C proof of coverage, medical bills

  • Accident reports/claims

  • Insurance Policies (after expiration/termination of policy)

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Keep Forever:

  • Income Tax Returns

  • Audit/Examination Reports

  • Legal Records and Correspondence

  • Property records (purchase statement, mortgage, deed, lease, depreciation schedules, improvements, closing statement) - keep at least as long as you own the property + 6 years

  • Important Correspondence

  • Bank Statements - most banks will only keep records online for a few years. A digital backup (scanned or downloaded) will take very little time to update and very little space, but can be a valuable backup in case of tax or legal issues that can go back many years.

  • Retirement & Pension Plans

Business

Business Records

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Keep For 1-2 Years

  • Deposit Slips - verify before destroying

  • Receiving Sheets

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Keep For 5 Years

  • Sales and income records such as 1099s, sales invoices, sales agreements/contracts

  • Business expenses records - date, description/type, terms, and proof of payment; mileage logs

  • General Correspondence with Suppliers, Customers, Vendors, and others

  • Internal Reports

  • Insurance Policies (after expiration)

  • Gain and Loss records such as asset cost, sales price, improvements, purchase agreement, escrow documents, brokerage statements

  • Physical Inventory Tags and Records

  • Have a CA seller's permit? You should keep records to backup your sales tax reports and payments. If you have a POS/register system that overwrites data after a certain period of time, remember to make a backup of that data periodically.

  • Renewals of local business licenses or payment of local taxes (e.g., City of LA)

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Keep For 7 Years

  • A/P and A/R Ledgers

  • Bank Reconciliations

  • Expired Leases and Contracts

  • Inventories Records of Products, Materials, Supplies, and Finished Goods

  • Inventory Costing Records

  • Invoices to Customers

  • Travel and Entertainment Records

  • Payments to Vendors, Employees, etc.

  • Notes Receivable and Payable - after satisfaction

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Keep Forever

  • Bank Statements

  • Corporate Documents (Articles of Incorporation, Charter, By-laws, Meeting minutes, EIN SS-4, Stock Certificates, etc.)

  • Income Tax Returns

  • Charts of Accounts and Year-End Financial Statements (P&L, Balance Sheet, etc.)

  • Accident or Injury Claims Payout Reports

  • General Ledger

  • Depreciation Schedules

  • Legal Records and Correspondence

  • Deeds, Mortgages, Bills of Sale, Property Appraisals

  • Trademark and Patent Registrations

  • Seller's Permit

  • Local country or city business permits or licenses

  • Insurance Policies

  • Audit Reports

  • Cancelled Checks (for important payments only)

Employers

Employer-Related Records

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Personnel Records (keep at least 5 years after termination)

  • Employment application, resume, W4 or W9, I9, copy of Driver's License

  • Disciplinary action, performance evaluations, training logs

  • Termination notices, quitting notices, temporary layoff records, exit interview/agreement, severance package details

  • Union participation records

  • Policy change notices provided to employee

  • Company property issued to employee

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Employee wage and payment records (5 years)

  • Time cards, paystubs including pay periods covered

  • Date of pay rate changes

  • Work locations

  • Cash payments or payments of in-kind wages (such as meals, lodging, gifts, bonuses)

  • Sick/holiday pay or paid leave - accrual, usage, requests

  • Any advances or wage garnishments

  • Union dues withheld/paid on employee's behalf

  • Payment of employer-sponsored benefits, such as health insurance, contributions to retirement, etc.

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Payroll Reports (7 years)

  • Employment Tax Records, including employment tax quarterly/annual reports, and payment records

  • Payroll Records Summaries - payroll journal and/or payroll register

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Workers Compensation Records

  • Records to keep: logs of work-place injuries, claim forms, benefit denial letters, reports to Division of Workers Compensation, records of benefits paid, appeal applications, compensation awards, and notices sent to injured employees

  • How long to keep them:

  • for open claims - 5 years from the injury date or last payment, whichever is later.

  • for closed claims - 2 years after closure or after compensation has been fully paid, whichever is later

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OSHA Records

  • Medical records and Records of Exposure to potentially toxic substances (30 years after termination/resignation)

  • Work–Related Death, Illnesses, and Injuries (other than minor injuries requiring only first aid treatment) - Logs and Incident Reports (forever)

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Keep Forever

  • Employee identification information (full legal name, social security number, contact information)

  • Employee handbook - including amendments

  • Employment agreements/contracts

  • Job listings

  • Retirement and Pension Plans

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*Independent contactors are also included within the meaning of "employees" for the purpose of this page

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