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What are the Different Types of Document Retention Requirements?
Business owners and individuals are often advised to follow standard document retention requirements for business, tax, and legal purposes. The length of time required depends on the type of document in question. Some requirements for retaining business documents can be as short as one year or as long as indefinitely. In the United States, there are recommended federal retention requirements as well as state retention requirements, and in some cases these conflict. There are also document retention requirements that are specific for business records and others that address tax records.
Business records must often be kept by the secretary of a corporation or owner of a small business for a period of time determined by regional and national laws. The reason is that customers and others may sue the business, and those records may be subpoenaed as part of the discovery process in a civil lawsuit. It may also be seized by the government because of a criminal proceeding against the business owner or company. Some business records must be kept indefinitely according to laws in some jurisdictions, such as corporate bylaws and deeds to real estate that the business owns. Examples of records that often can be disposed of after three years include bank reconciliation statements, inventory records, and employment applications.
There are also document retention requirements as they pertain to tax records. For example, the Internal Revenue Service in the United States recommends that employment tax records be kept for at least four years after the original tax return due date. It’s often recommended that property tax records be kept indefinitely. Other tax records, such as a claim for a tax refund after taxes were filed, should be kept for at least three years or if the individual owes taxes after filing the tax return. Tax experts often advise taxpayers to keep records for seven years after filing to ensure that they will not be subject to a tax audit, which can occur many years after filing their tax returns.
Preparation and planning for lawsuits or protection in the event of a lawsuit are other reasons why individuals follow standard document retention requirements. It is recommended that individuals hold onto certain records indefinitely for legal purposes, including vital records such as birth certificates and adoption papers. It’s often recommended that tenants keep leases until the statute of limitations expires, which means the landlord or the tenant can no longer file a lawsuit based on the tenancy.
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![There are business, tax, and legal reasons by people must hold onto various documents.]()
By: pixelrobotThere are business, tax, and legal reasons by people must hold onto various documents. -
![Property tax records should be kept indefinitely.]()
By: emiliezhangProperty tax records should be kept indefinitely.
Discussion Comments
@Vincenzo -- Getting rid of old files isn't necessarily an admission of guilt. You never know what could come up in old files that could be used against your company.
Lets say, for example, those files document activities one of your clients engaged in that was legal at the time but has been ruled illegal. Do you really want that information to fall into someone's hands?
What I'm getting to is privacy. A client who does business with you should expect a certain amount of privacy. Destroying old files will help preserve that privacy.
@Logicfest -- I don't agree. If you are worried about future legal liability, just do right by your clients or customers and you should be fine. There should be no reason for you to have to destroy your files if you have done nothing wrong.
This might seem like a minor issue, but document retention is very important. Specifically, not holding onto documents for longer than you are required is important.
Let me explain.
Let's say you have a law firm and you are required to keep your client files for seven years. After that seven years, do you shred them or move them to more long term storage?
Because of our litigious society, it might be a good idea to shred those documents after the required time to keep your mitts on them has passed. The same goes for any industry -- those files could contain some information that could be used against you in a court of law. Destroy those things as soon as you can by law or professional standard and remove that possibility.
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