On Letting It Go

Santa Rosa CPA Financial Record Retention RulesBaggage and the Art of Record Retention

One of the biggest problems I ever had when I was married was learning to “let it go”. For some reason, it seemed to me that every issue had to be dissected, analyzed, discussed, and ultimately resolved. I guess I wasn’t much fun to live with, judging from the way so many of my marriages ended in divorce. Anyway, I have since learned to “let it go”, and it has made me a happier, better person.

This has proved useful in business too. For example, clients frequently ask me how long to hold on to their tax records. Here is a summary of my recommendations on when to “let it go”:

  1. Income tax returns and W-2s: Hold these indefinitely. You may end up needing to show these to the Social Security Administration if there is ever a snafu involving your Social Security number or question about your identity. Imagine applying for social security and discovering that your records had been accidentally erased!
  2. General ledger for Corporations/Partnerships: Hold these indefinitely. The entries made during the early years of these entities may determine the proper tax treatments when they are liquidated.
  3. Assets purchased: Hold until 5 years past the sale of fixed assets, including real estate, vehicles, machinery, furniture, computers, collectibles, and office equipment.a)  Homeowners: Keep a record of all improvements made to the property,
    no matter how small. Save the receipts. Keep a running tally of all the
    improvements.b) Rental Property Owners: Put all improvements on your tax return.
  4. Payroll records: Hold these for 8 years if you have employees.
  5. Appointment Books/Calendars: Hold these indefinitely. No special reason, except that it’s fun to reminisce. Hold for at least 4 years for tax purposes.
  6. Bank Statements, Pay Stubs, Cancelled Checks, Customer Invoices, and Receipts for Expenses: Hold for 5 years. Why 5 years? Although the IRS can audit tax returns dating back 3 years from the date of filing, states can frequently go back 4 years. This means that, for example, your 2009 return (which was filed in 2010) is still fair game until April 15, 2014, or October 15, if you filed an extension. So on January 1, 2014, you should still have 2009, 2010, 2011, 2012, and 2013. You are safe to discard 2008 and years before.

Now about any issue between you and your spouse… well, I’m certainly not the best person to give advice in this area, but I think the best choice would be to “let it go” –
and the sooner, the better!