Businesses and individuals should follow record retention requirements for business, tax, and legal purposes. The time required depends on the type of document. Some requirements conflict, and some documents must be retained indefinitely. Retention is necessary for legal action and litigation protection.
Business owners and individuals are often advised to follow standard record retention requirements for business, tax and legal purposes. The time required depends on the type of document in question. Some business records retention requirements may be one year or indefinitely. In the United States, federal retention requirements and state retention requirements are recommended, and in some cases these conflict. There are also document retention requirements specific to business records and others that pertain to tax records.
Business records are often required to be retained by a company secretary or small business owner for a period of time determined by regional and national laws. The reason is that customers and others can sue the company, and those documents can be subpoenaed as part of the discovery process in a civil suit. It can also be seized by the government due to a criminal case against the business owner or company. Certain business records are required to be retained indefinitely under the laws of some jurisdictions, such as company bylaws and company property deeds. Examples of documents that can often be purged after three years include bank reconciliation statements, inventory records, and job applications.
There are also document retention requirements as they pertain to tax records. For example, the Internal Revenue Service in the United States recommends keeping employment tax records for at least four years after the due date of the original tax return. It is often recommended that property tax records be kept indefinitely. Other tax records, such as a tax refund claim after filing taxes, should be kept for at least three years or if the individual owes taxes after filing their income tax return. Tax experts often advise taxpayers to keep records for seven years after filing to ensure they won’t be subject to a tax audit, which can occur many years after filing a tax return.
Preparing and scheduling legal action or litigation protection are other reasons people follow standard record retention requirements. It is recommended that individuals hold certain documents indefinitely for legal purposes, including vital records such as birth certificates and adoption records. It is often recommended that tenants keep their leases until the statute of limitations has expired, meaning that the landlord or tenant can no longer sue based on the rent.
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