Record Retention Guidelines
When deciding upon a firm’s record retention procedures, it would be wise to consult federal and IRS regulations and state and local government record retention requirements. The IRS generally must assess additional tax within 3 years after the due date on a return. (So, keep records for 3 years.) A period of 6 years applies if the taxpayer omits items of gross income that in total exceeds 25 percent of gross income reported on the return. (Therefore, keep records for 6 years.) If a fraudulent return is filed or no return is filed, there is no limit to the period the tax can be assessed. (So, retain records permanently.)*
*See “How Long Should I Keep Records?” athttp://www.irs.gov/businesses/small/article/0,,id=98513,00.html
Record retention policies are generally based on two questions:
- What must I keep?
- How long do I have to keep it?
The suggested retention periods listed at http://porterfieldcpa.com/dynamicontent.php?id=main&article=1032 have no legal authority and are simply guidelines for use in dictating your firm’s record retention needs. In certain situations, it might be appropriate to keep records for longer periods than legally required.