It is easy to give a general answer such as "seven years" or to base the amount of time that records should be relegated to a dark corner on the number of years the IRS has to come back and audit tax files. However, do not give in to the easy route.

Clients trust you. They want to know that their trusted advisor has their best interest in mind. A question about records retention may sound simple until a little thought is put into it. What will happen if the client throws away important tax checks or housing documents? Before you answer, think about it. Are you sure? Is that what you would do?

The amount of time that individuals should hold onto certain records depends on many factors - only one of which is the IRS. Insurance adjusters, mortgage companies, and others are sometimes too eager for important records to slip through the cracks. When it comes to records, it is probably safest to err on the time side. After all, your clients are the only ones who will lose if they do not have the information they need when they need it.

Here are some guidelines that tend to be very conservative:

• Taxes: As a general rule, the IRS has three years to audit a return, which is a safe period of time for taxpayers to keep most tax records. The IRS has six years to act if a taxpayer substantially underreports their income. However, there is no time limit in the case of fraud. Therefore, to play it safe, save returns and supporting documents for six years.
• Home: Home expenses can be divided in to two categories - repairs (routine plumbing) and improvements (room additions). Once the warranty period expires on repairs, the receipts can be discarded, but save the ones for improvements indefinitely. Improvements add to the tax basis of a home and can reduce capital gain in the future.
• Checks: Tax related checks should be filed with the corresponding return and discarded when it is time to throw out the return. Checks for home improvements should be kept in the "home" file, while checks for major household purchases should be kept with corresponding receipts and warranties. Any checks or statements that are not tax related can be thrown out after one year.
• Insurance: Individuals should talk to their insurance agent about throwing out expired policies, as the liability for prior years may vary. Current policies should be kept for at least 12 months, as should the canceled checks and statements.
• Investments: A good rule of thumb is to retain confirmation slips for as long as a person owns an investment, plus an additional three years. For mutual funds, money market accounts, retirement plans and limited partnerships, individuals should hold on to the original prospectus, the most recent account statement, and each year's cumulative annual statement or Form K-1. Additionally, any documents that show reinvested dividends in taxable accounts should be retained. Old proxy statements, brochures, and interim account statements can be thrown away.
• Miscellaneous: Use common sense when deciding what to do with other documents that do not fall into the above categories. If an old receipt or bill is needed to support a tax deduction or a warranty claim - save it. Otherwise, it is just taking up closet space and can be tossed with your next days' trash.

Accounting firms are sure to find that a records retention schedule will be one of their most popular handouts in the lobby. Be sure that you have one available and that it provides tips similar to those presented in this article. Use the one provided below as a guide or develop your own. Your clients will thank you for it!

Records Retention Schedule
Accident reports/claims (settled cases)	7 years
Accounts payable ledgers and schedules	7 years
Accounts receivable ledgers and schedules	7 years
Audit reports	Permanently
Bank reconciliations	2 years
Bank statements	3 years
Capital stock and bond records: ledgers transfer registers, stubs showing issues, record of interest coupons, options, etc.	Permanently
Cash books	Permanently
Charts of accounts	Permanently
Checks (canceled - see exemption below)	7 years
Checks (canceled for important payments, i.e. taxes, purchases of property, special contracts, special contracts, etc. Checks should be filed with the papers pertaining to the underlying transaction.)	Permanently
Contracts, mortgages, notes, and leases (expired)	7 years (still in effect) Permanently
Correspondence (general)	2 years
Correspondence (legal and important matters only)	Permanently
Correspondence (routine) with customers and/or vendors	2 years
Deeds, mortgages, and bills of sale	Permanently
Depreciation schedules	Permanently
Duplicate deposit slips	2 years
Employment applications	3 years
Expense analyses/expense distribution schedules	7 years
Financial statements (year-end, other optional)	Permanently
Garnishments	7 years
General/private ledgers, year-end trial balance	Permanently
Insurance policies (expired)	3 years
Insurance records, current accident reports, claims, policies, etc.	Permanently
Internal audit reports (longer retention periods may be desirable)	3 years
Internal reports (miscellaneous)	3 years
Inventories of products, materials, and supplies	7 years
Invoices (to customers, from vendors)	7 years
Journals	Permanently
Magnetic tape and tab cards	1 year
Minute books of directors, stockholders, by-laws and charter	Permanently
Notes receivable ledgers and schedules	7 years
Option records (expired)	7 years
Patents and related papers	Permanently
Payroll records and summaries	7 years
Personnel files (terminated)	7 years
Petty cash vouchers	3 years
Physical inventory tags	3 years
Plant cost ledgers	7 years
Property appraisals by outside appraisers	Permanently
Property records, including costs, depreciation reserves, year-end trial balances, depreciation schedules, blueprints, and plans	Permanently
Purchase orders (except purchasing department copy)	1 year
Purchase orders (purchasing department copy)	7 years
Receiving sheets	1 year
Retirement and pension records	Permanently
Requisitions	1 year
Sales commission reports	3 years
Sales records	7 years
Scrap and salvage records (inventories, sales, etc.)	7 years
Stenographers' notebooks	1 year
Stock and bond certificates (canceled)	7 years
Stockroom withdrawal forms	1 year
Subsidiary ledgers	7 years
Tax returns and worksheets, revenue agents' reports, and other documents relating to determination of income tax liability	Permanently
Time books/cards	7 years
Trademark registrations and copyrights	Permanently
Training manuals	Permanently
Union agreements	Permanently
Voucher register and schedules	7 years
Vouchers for payments to vendors, employees, etc. (includes allowances and reimbursement of employees, officers, etc., for travel and entertainment expenses)	7 years
Withholding tax statements	7 years