When Can I Dispose Of My Tax Documents?

Many companies aren’t sure how long they should hold onto important tax paperwork. It’s easy to get overwhelmed by piles of papers. However, you don’t want to end up throwing out something that you may need to refer back to down the road. Bankers, accountants, lawyers, and government agencies all have differing opinions about how long you should retain tax documents, which makes the process even tougher. The following guidelines will help you make educated decisions about your tax documents and related paperwork.

Business Income Tax Returns And Supporting Documents

You should hold on to the final business income tax return paperwork and any related IRS correspondence as long as your company is still operational. This documentation will help you prepare future and amended returns. The IRS suggests organizations keep supportive records for any business income or deductions claim until the constraint duration is over for that tax return. The period of limitation starts at the filing date and ends on the date that you might attempt to amend the return for a refund or credit or the IRS may contact your business about additional taxes.

Typically, the IRS can follow up with a business for failing to report income for a maximum of six years after your filing, as long as the amount exceeds 25 percent of your business’ total income. Did you file for a deduction for a worthless security or a bad debt? If so, the IRS recommends holding onto supporting tax records for seven years. Under these circumstances, you may want to hold onto other supporting records as well.

Employment Tax Records

Do you have employees on staff? The IRS suggests keeping all employment tax records for a minimum of four years after those taxes were due or were paid, whichever is most recent. These employment tax records may include any or all of the following information: employer identification number, annuity and pension payments and tax depositions, amounts and dates of wages, social security numbers, names, addresses, occupations of employees, dates of employment, and records pertaining to fringe benefits and allocated tips.

Bank Account And Credit Card Statements

The general time period for keeping bank account and credit card statements is seven years. If you need this documentation for tax purposes, you may need to hold onto them for a little longer. If these statements are not related to your taxes or other key business purposes, keep the comprehensive annual statements for seven years and the monthly statements for one year.

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