Barry Dolowich, Tax Tips: Record retention guidelines

Q. We are selling our house and moving into an assisted living facility. My wife has put me in charge of disposing of our old paperwork. Most of the paperwork consists of our house bills, personal tax returns, and records from my wife’s small home-based business that she has long ago closed. What should we retain and for how long and what can we dump?

A. The following schedule details my recommended retention periods for your various personal and business records:

Audit reports of accountants, capital stock ledgers, cash books, charts of accounts, checks, canceled (important payments, i.e., taxes, property purchases, special contracts, etc.), contracts and leases still in effect, correspondence (legal and important matters only), deeds, mortgages, and bills of sale, property records, depreciation schedules, financial statements (end-of-year, other months optional), general and private ledgers (and end-of-year trial balances), insurance records, current accident reports, claims, policies, etc.), journals and subsidiary ledgers, minute books, including by-laws and charters, principal residence purchase and improvement support, and tax returns and worksheets, correspondence should be all be retained permanently.

Accounts payable and receivable ledgers and schedules, checks, canceled (normal operating payments), contracts and leases (expired), expense analyses and expense distribution schedules, inventories of products, materials and supplies, invoices to customers and from vendors, payroll records and summaries, including pension payments, sales records, and voucher registers, schedules, payments, etc. should all be retained for seven years.

Personal tax return support and paid bills, and personal bank statements and canceled checks should all be retained for five years.

Correspondence (general), employee personnel records (after termination), employment applications, insurance policies (expired), and petty cash vouchers should all be retained for three years.

Bank reconciliations, correspondence (routine) with customers and vendors, duplicate deposit slips, and purchase orders, receiving sheets, requisitions should all be retained for one year.

The above record retention periods are only recommendations. However, you need to use your own judgment. If you have any doubt, save the records or speak to your tax adviser.

Should you discard any old records, I strongly recommend that you shred or burn any potentially sensitive financial and personal information. With financial identity theft on the rise, this is a good common-sense practice. Also, when in doubt, contact your income tax preparer before discarding your records!

Barry Dolowich is a certified public accountant and owner of a full-service accounting and tax practice with Monterey. He can be reached at 831-372-7200. Please address any questions to Barry at PO Box 710 Monterey, CA 93942 or email: bdolowich@gmail.com.

Contributed by local news sources

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