How long should you keep your records?
Sometimes the records generated by a business or nonprofit organization can be overwhelming! Do you save everything, “just in case,” or do you throw the records out as soon as you are finished with them to keep your desktop (physical or digital) clean? The best policy will be somewhere in the middle.
Why keep records?
The right records can document the legal status of your organization, support your IRS and other tax filings, and demonstrate that you have followed employment laws. They also show whether you have met the terms of a contract, paid others amounts you owe, document amounts that others owe you, and support the accuracy of your financial statements. When questions arise, good records can help answer those questions quickly so that you can move on to the other important work you do each day.
You are required to retain records by the IRS and other government agencies. Retaining documentation of contracts, major purchases and sales, and insurance policies will help you defend yourself if any disputes or lawsuits arise.
**For records that you retain in digital form only, you must be able to access the digital format for the entire (or permanent) retention period. This means that for older digital files, you must test accessibility for compliance, especially when major changes in digital technology occur.
We have summarized some broad suggested guidelines for document retention below. Of course, everyone’s business or organization is different, and it may have additional requirements for special circumstances. Call us if you have any questions or concerns, or would like us to review your organization’s document retention policy with you.
· Articles of Incorporation and amendments
· Bylaws and amendments
· Deeds and bills of sale
· Correspondence: Legal or other important
· Board of Directors: meeting minutes and resolutions
· Policy documents: personnel, document retention and destruction, etc.
· Personnel files: active employees
· Retirement plan: Legal plan description and IRS Form 5500
· Contracts, mortgages, notes and leases: in effect
· Insurance policies and claims: active
· Year-end financial statements, including list of assets owned and related
· Audited financial statements
· Copyrights and trademark registrations
· Annual federal tax return for business entity (IRS Form 990 for NFP)
· IRS Determination Letter for income tax exemption (NFP only)
· Application for IRS tax-exempt status (NFP only)
· General ledger, including documentation supporting general journal entries
· Bank statements with reconciliations
· Deposit and disbursement records
· Payroll records with timesheets
· Payroll tax filings: IRS Forms 941 and 940, W2s and 1099s, state unemployment and
· State and local business tax filings
· IRS correspondence
· Personnel files: terminated employees
· Retirement plan: annual participant statements and reports
· Contracts, mortgages, notes and leases: expired
· Insurance policies: expired
· Annual Corporation Report (State of Washington)
· Charitable Solicitation Registration (State of Washington – NFP only)
· Functional expense distribution schedules (NFP only)
· Employment applications
· Correspondence: general, customers or vendors
Different agencies require that you keep documents for different lengths of time, and the statutes of limitation differ among states and types of activities. We are happy to work with you on a document retention policy tailored to your organization’s specific needs. And for individuals, be sure to look for our separate blog post discussing personal recordkeeping and record retention!