While the crates of classic rock albums in your attic are a record collection worth keeping, chances are you’re less enthusiastic about your “other” record collection: the high volume of old business records taking up valuable space in your office or on your hard drive. Even if you and your bookkeeper have established an efficient filing system, an overabundance of records can make it difficult to find sought-after documents.
Periodically purging old records can be a satisfying way to cut clutter, stay organized, and save space (whether physical or digital), but it’s important to know which documents you may need down the road. The next time you get into a cleaning frenzy, follow these record retention guidelines to avoid discarding something important:
Certain events, transactions, and legal agreements may require supporting documentation years later. For this reason, it’s important to hold on to records such as:
Keep for 7 years
Any records used in tax filing as evidence of your business income, deductions, or credit should be kept until the IRS’ period of limitations runs out. As a best practice in case of an IRS audit or legal dispute, keep these records for at least 7 years:
Exceptions to the 7-year rule
The 7-year rule should be modified under certain circumstances. Hold related documents for at least 7 years from the date of:
Think before shreddingBefore shredding business documents, also consider whether these records could be needed for other nontax purposes, such as by your insurance provider or lender.