Whether at home or in the work place, it’s not always easy to determine which financial records are ready for the shredder and which ones need to be organized, filed, and held secure in case they’re needed later.
Your CPA in Tampa at Reliance Consulting, LLC can help. There are legal reasons why you should keep some documents longer than others. For example, in business or at home, tax returns and their accompanying documents should be kept for at least seven years in order to clear the window of a potential audit by the Internal Revenue Service.
More specifically, in business, well-organized records also can help provide protection from legal action, as well as serve as a guide for best practices. If something goes awry, it’s always helpful to have documentation on hand to lend credence to a legal argument or as a reference for how past problems were solved. Furthermore, profit-and-loss statements, cash flow statements and an annual balance sheet are important tools to help determine the direction of the company.
The amount of time you should keep different financial records varies. Here are some examples of records that a business should consider keeping permanently:
- Tax returns
- Articles of incorporation
- Copyrights and trademarks
- Public accountant audit reports
- Legal and other important correspondence
Individuals can follow a slightly different set of rules for keeping financial records. At home, you should consider permanently keeping records of improvements to the house, receipts from big purchases for insurance purposes, statements of IRA contributions and other important personal documents.
Remember that there are many ways to store records. The old-fashioned file cabinet works well for some, but financial software, scanners, and other methods of electronically saving documents have alleviated much of the need to find more cabinet space as those documents pile up year after year.
For help in deciding which financial records to shred and which to keep, or for guidance in organizing your financial records, talk with your CPA in Tampa at Reliance Consulting, LLC.