Wondering if you can get rid of some papers in your file cabinets? If you clean out your cabinet at the end of the year, you may have a storage unit filled with old paperwork. The question often comes up of what you can trash and what you need to keep. While it is a mundane task and question to consider, we as your Rochester CPA want you to be able to move around your file cabinet a little easier. Perhaps you can shift to a small storage facility or get that home closet back after reading this. As a topic of discussion we are going to focus on what you can trash rather than discuss more on financial record keeping.
Part of Rochester taxes is keeping records for seven years including tax returns and supporting data for those returns. Legally the IRS can audit you for past returns up to seven years at least. As a Rochester CPA, we suggest that you keep your tax returns forever, especially if you have tax-deferred retirement accounts. You can still get rid of the backup materials for those later years, but you should always have a copy of the return. Additionally audit reports, general ledgers, financial statements, and journals need to be kept for life. Any legal correspondence, documents to real estate, contracts and corporate records like articles of incorporation to shareholder paperwork needs to be kept. When it comes to your bank statements for Rochester taxes you should keep them for six years including any deposit slips, journals, sales records, and information regarding employee income or expenses.
Not only can this information be helpful for future tax planning, but you may find you need them. Looking back over time is quite helpful to see what happened from year to year, perhaps finding when things went great or not so great. You can get rid of canceled checks, payroll records, paid invoices, depreciation schedules, donation receipts, paperwork for expenses, inventory records, and real estate tax bills. All other items can be trashed if you want. It can be a matter of turning all these copies into an electronic format too. For some things such as those requiring your signature, it is best to keep them. Yet, there are also electronic signatures we are able to take now. The most important thing is to keep clear records whether you do so electronically or through paper.
The dangers of electronic records are what might happen should your computer or drive crash. If you decide to save on a drive by scanning in the older documents and keeping those with your signature in a file, then it is important to have multiple backups which are not related to each other in any way. Saving to a dedicated server, a hard drive backup, and your main computer are at least three ways to ensure you have at least one copy of your electronic records for taxes.
RDG+Partners wants to be the primary advisor for motivated business owners. The firm is committed to providing boutique level accounting, tax and business consulting services to the Rochester, NY community.