How Long Do You Have to Keep Financial Records
The bulking piles of financial records can make your office cluttered. It is necessary to keep financial records for monitoring purposes.
But you should also know how long you have to keep financial records.
During the time when the technology is not yet too innovative, many businesses keep their financial records in boxes and other storage. Fortunately, nowadays documents can be stored electronically in such a way that you can save documents in data storage. Nevertheless, even if you are storing financial documents electronically yet it does not necessarily mean that those documents will be kept forever. Thus, you need to know and understand that financial documents should be filed accordingly. In this way, you will identify which records are needed to be eliminated from the electronic files.
Financial records kept for a year
Some of the financial records that should be kept for a year include bank statements, retirement plan statements, monthly bills, credit card bills, pay check stub and insurance policies. In keeping these financial records you need to check and review the documents. Separate the old statements from the recent one. If you think that old files have nothing to help with the current flow of the business then you need to shred them.
Financial records stored for 7 years
Payment for taxes is one of the financial records that you should keep for at least seven years. This is because you can file amended return within three years so that you can claim the refund. Likewise, the IRS allows three years prior of auditing a business entity. In the same manner, in case there are unreported income of your business the IRS would wait six years for you to reconcile your income tax.
Financial records kept indefinitely
If there are financial records that your company should keep for longer years are the IRA contributions, brokerage statements, loan documents, home records and receipts. These are the records that would show as proof of contributions and payment of taxes. These should be on your possession until such time that you decide to sell such property.
Moreover, to avoid clutter of financial records in your office the best way to do is use electronic documents. In this way you need not use papers and there is no need for mailing. This is environmentally friendly and at the same time saves lots of efforts and time. Opting for electronic records allows you to keep all the financial records as long as you want. The advantage of keeping documents electronically is that you can easily download and print anytime you want. On the other hand, if you will store financial records electronically make sure that it should be organized. In this way, you can easily find the necessary documents when the needs arise. Always keep in mind that documents that are not anymore relevant to your business should be deleted in your electronic files to allow recent financial records to be included in the files.