What documents NOT to Shred
Secure document destruction is a regular habit for records managers in a time when business data leaks are rampant, and especially during tax season. Shredding is only one aspect of records management; and records management experts know that not every document is destined for destruction.
Stuart Johnson, senior account executive at Corodata, explains that there is no end date to records management.
Here are five document types not to shred and are better to keep.
Business income tax returns and receipts
Keep business tax returns. It can help you file for the coming year, and serve in case of further IRS audits. Remember, one reason the IRS can audit companies is for failing to report income that is more than 25 percent of gross income. Supportive tax documents should be retained for at least seven years.
You should always get and keep receipts for proper tracking and verification of all claimed tax deductions. All supportive tax documents should be retained for at least seven years.
Employee and Client Personal Information
The IRS recommends that you hold on to employee files for at least four years after their employment is terminated. That can include employment ID information, such as names, addresses, and social security numbers, records and amounts of wages, pension plan payments, and even employee emails and performance reviews.
If your industry stores financial data or other personal data for clients, it’s important to consider how long and how securely that data is being stored. The IRS requires that individuals are able to produce records providing income, deductions or credit claims for up to seven years from the date of a return (source). That means your clients may be coming to you for that information if they don’t have it.
With CCPA now upon us, it’s good practice to retain employee and client records for as long as your retention schedule requires you to, and then give it to them. The exception to this rule are records for employees with open workers’ comp claims—those are definitely documents you’ll want to keep.
Business property records.
These records will aid you in calculating applicable depreciation, amortization or depletion deductions and to determine any gain or loss on that property. Keep documents related to anything that you consider an asset—such as the deed of a property, vehicle titles, or equipment—in a secure place until your business no longer owns it.
Canceled checks, bank statements, and credit card statementsCanceled checks should be saved for a year. The exception: never throw away checks made out to the government. Annual credit card and bank statements should be saved for seven years, and even longer if they serve as supporting tax documents. Keep the detailed monthly statements for about a year before safely destroying them.
Business documentation, such as profit and loss statements, major announcements and annual corporate reports are key items to retain and store in case of an audit. Public companies are required to retain their profit and loss statements as a matter of public record.
Keeping these documents permanently as a record of any business is also valuable. P&L statements are a great way to track how a company performs over time. Other non-tax related financial documents that are good to keep for at least seven years are accounts payable and receivable, invoices, and expense reports.