Record Keeping

(Credit: Public Domain Images) "What the world really needs is more love and less paperwork," actress and singer Pearl Bailey once said. Of course, she was right. But the government doesn’t see it that way. Different agencies have different record retention requirements. And in addition to this, there are other record-keeping requirements for your small business. Here is a roundup of some of the records you need to keep and for how long. Company Records As a business, you need to keep a number of records. These include: Incorporation or limited liability company formation receipt from your state: keep permanently. Bylaws and corporate minutes: keep permanently. Licenses and permits: keep permanently. Contracts: keep at least 7 years. Leases: keep at least 6 years. Trademarks, copyrights, and patents issued by the federal government: keep permanently. Annual financial statements (P&L, balance sheet): keep permanently. Real estate purchases (deeds) and leasehold improvements: keep permanently. The retention period for other business records—customer records, purchase orders, inventory records, expense records—should be kept as long as you think they are useful to your business. It’s generally advisable to keep these records for at least 7 years. Records related to fixed asset purchases must also be maintained for tax reporting (including figuring depreciation), balance sheet reporting, and maintenance schedules. It’s probably wise to keep these records permanently. IRS The IRS has specific time requirements for record retention for various purposes. Keep copies of federal income tax returns, plus supporting documents for 3 years (6 years if more than 25% of gross receipts is omitted). This applies for: Form 1040 Form 1065 Form 1120 Form 1120S Note: It’s highly advisable to retain a copy of the return and proof of filing forever, since there is an unlimited period for an audit if no return is filed and it may happen that the government doesn’t see that you filed. Keep copies of federal employment tax returns, plus supporting documents (e.g., time sheets) for a minimum of 4 years after the due date of the return for the period to which the return relates (tax experts suggest 7 years). This applies for: Form 941 Form 942 Form 944 Form 945 Keep copies of information returns issued by your company, including: Form 1099-MISC Form 1099-R IRS forms for qualified retirement plans are discussed below under DOL. DOL The Department of Labor has its own record retention requirements. Keep copies of employee benefit and retirement plan forms, plus supporting records, for 6 years. This applies to: Form 5500 Form 5500-SF Form 5500-EZ OSHA requires records to be kept for 5 years following the end of the calendar year that the records cover. This applies to: OSHA 300 Log OSHA 301 Incident Report forms The Fair Labor Standards Act (FLSA), which governs minimum wage and overtime rules, requires every employer to keep records for covered, nonexempt employees. Records must be kept for at least 3 years; these records include payroll records, collective bargaining agreements, sales and purchase records. Records on which wage computations are based must be kept for 2 years (e.g., time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages. There’s no special form for this. Just be sure the records include: Employee’s full name and social security number; Address, including zip code; Birth date, if younger than 19; Sex and occupation; Time and day of week when employee’s workweek begins. Hours worked each day and total hours worked each workweek. Basis on which employee’s wages are paid; Regular hourly pay rate; Total daily or weekly straight-time earnings; Total overtime earnings for the workweek; All additions to or deductions from the employee’s wages; Total wages paid each pay period; Date of payment and the pay period covered by the payment. Record Retention Strategies Paperwork doesn’t mean physical paper that you can hold in your hand. Your records can be fully or partially electronic. Electronic records can be created by scanning paper documents or they can be online creations of required records. Whichever way you decide to maintain records, be sure that: The integrity of records is maintained. If records can be altered, they don’t meet record-keeping requirements. The records are retrievable. Government agencies may want to see your records and having easy access to them can save you a lot of grief. The records are backed up. Store copies in the cloud for best protection. Final Thought The listing of records above is not exclusive. Your business may have other record-keeping requirements, such as forms required to be filed at the state or local levels. Be sure to review your record-keeping obligations and create the record-keeping retention system that will work best for you. Barbara Weltman is the founder of Big Ideas for Small Business, Inc., which publishes Idea of the Day. She is the author of J.K. Lasser’s Small Business Taxes 2019 and other books that inform the small business community of tax, financial, and legal information they should know about.

Record Keeping

Record Retention: A Handy List of What to Save (and For How Long)

The Story Exchange

Record Keeping

Record Retention: A Handy List of What to Save (and For How Long)

The Story Exchange

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