How long do you have to keep records

Keeping VAT records

1. Overview
2. What purchase records do you keep?
3. What sales records do you keep?
4. How long do you keep records for?

The retention of certain records is subject to specific time limits. These time limits are outlined in the scenarios listed below:

A person holding a waiver of exemption from Value-Added Tax (VAT) on the letting of property.  

Records relating to those lettings should be stored for six years following the cancellation of that waiver.

1. A person makes a claim under VAT legislation.

Relevant records should be stored for six years or until the matter at issue is finalised.

2. A person makes an appeal to the Tax Appeals Commission.

Relevant records should be stored for six years or until the matter at issue is finalised.

3. A matter is under inquiry or investigation by Revenue.

Relevant records should be stored for six years or until the matter at issue is finalised.

4. In the case of interests in property acquired or developed prior to 1 July 2008 on which VAT was charged.

Relevant records in respect of that property should be stored for six years after disposal of that interest.

Written permission from Revenue is required for the retention of relevant documents for a period shorter than those outlined above.

You should retain records as follows:

• store paper issued invoices in paper form
• keep paper records within the State. Exceptions to this require Revenue agreement and are subject to conditions
• retain electronic records in accordance with the electronic invoicing rules.

Inspection of records

Revenue has extensive powers to inspect your records. It is an offence if you or your employees fail to co-operate with Revenue. This also applies in relation to the inspection of your records. Revenue officials will have proof of their identity when visiting your business to inspect your records.

You’ll want to keep some records and documents longer than others. It all depends on the document and your business.

Except for a few guidelines from government agencies, you won't find many hard-and-fast rules about how long to keep your business records. But you can make a plan for record retention by thinking about the purpose of a document and future situations that might arise.

Reasons for Retaining Business Records

When you think about retaining records and documents, the first thing that probably comes to mind is an IRS audit. While you need to present tax filings and supporting documents if you are audited or you wish to amend a previous tax return, there are many reasons for retaining other types of documents and records. Here are a few of them:

• Lenders whom you approach for financing might require income, sales history, and other documents.
• When you are negotiating with landlords, insurers, and other vendors, having a clear and written history of previous leases, insurance policies, and other contracts might strengthen your position.
• If you decide to sell your business, potential buyers will want to review historical records as part of their due diligence.
• If you become involved in a dispute or lawsuit, you might need meeting minutes and written agreements to support your position.

Which Records Should You Keep?

The records and documents that businesses should have if they need to address most situations include:

• business formation documents
• tax returns and supporting documents
• employment records
• sales receipts
• business asset records
• ledgers and registers
• leases or mortgage documents
• shareholder meeting minutes
• bank and credit card statements
• licenses and permits
• insurance policies and records, and
• loan documents.

How Long Should You Keep Business Tax Records?

Keep business income tax returns and supporting documents for at least seven years from the tax year of the return. The IRS can audit your return and you can amend your return to claim additional credits for a period that varies from three to seven years from the date you first filed. (These time frames are known as "periods of limitations.") But it's a good idea to use seven years as your guide for keeping these documents.

If you don't file a return at all, the IRS can come after your business at any time.

Examples of supporting documents include:

• profit and loss (P&L) statements
• financial statements
• check registers
• ledgers
• sales receipts
• expense reports, and
• invoices.

How Long Should You Keep Employment Tax Records?

The IRS suggests retaining employment tax records for a minimum of four years after the tax becomes due or has been paid, whichever is later. Employment tax records include:

• employees' names, addresses, social security numbers, dates of employment, and occupation
• wages, annuities, and pensions paid to employees with dates of payment
• taxes withheld including FICA and Medicare
• records of tips and fringe benefits paid if applicable to your business, and
• 1099 documents for independent contractors.

How Long Should You Keep Business Asset Records?

Business owners typically deduct costs for property and equipment that are used for the business, which reduces their tax bills. Owners might also claim deductions for the depreciation of property or equipment, or they might amortize costs like franchise fees. (Depreciation is a calculation of the declining value of a tangible asset over time. Amortization refers to a similar calculation when the asset is not tangible.) Because these types of records are usually part of your tax return, you should follow the same rules for tax records, counting the year that you disposed of the property as the start of the period of limitations. Keep deeds for property and titles to vehicles among these records.

When you sell one business property and buy another in an exchange such as a 1031 Exchange, you will want to retain the records on the property you sold as well as the property you acquired until the period of limitations runs out on the new property.

How Long Should You Keep Human Resources Files?

Depending on your business and the state where you are located, you might have many types of HR records that fall under the jurisdiction of different government agencies.

Generally, you will need to keep the most common types of forms and documents, like employment and job application records, family leave documents, performance reviews, and benefit election documents, for three to five years, depending on the record and the state where your business is located.

Workers' compensation records. Requirements and laws for retaining records on employees who are injured in the workplace vary by state, and you should check with the responsible state agency for guidelines on keeping these records. On the federal level, the Occupational Health and Safety Administration (OSHA) requires businesses to retain records on workplace injuries for five years.

Discrimination claims. Requirements for claims about discrimination also vary by state and the type of discrimination (age, gender, race, disability, and so on.) Federal agencies, including the Equal Employment Opportunity Commission (EEOC) and the U.S. Department of Labor, also have recordkeeping requirements for discrimination claims.

Employee pension and retirement plans. Pension and retirement plans might fall under both IRS and Employee Retirement Income Security Act (ERISA) rules. You might want to permanently keep records for employees who receive pension or retirement plan benefits from your company plan to protect yourself if the employee files a claim many years after retirement.

What Records Should You Keep Permanently?

In addition to pension and retirement plan documents, permanently keep business formation documents, corporate by-laws, annual reports, shareholder meeting minutes, and business licenses and permits to help explain to potential buyers, lenders, and others the actions and decisions you made while running your business.

Your Employer Identification Number (EIN) or Tax ID Number is like a social security number. It can never be assigned to another business, and you should retain it permanently, even if you no longer operate your business.

If you have an "occurrence-based" insurance policy, you will want to keep it indefinitely. Occurrence-based policies insure you as long as the policy was in effect on the date that the event giving rise to the claim occurred. Should you discover damages or other losses after you have dropped or changed your policy, your coverage remains in effect. (By contrast, a "claims made" policy will cover you only if the policy is in effect when the claim is filed.)

What Other Documents Should You Keep?

You might also have leases for your business premises, insurance policies, and business loan records, among other documents. Leases and insurance policies can be used to help your negotiating position when it comes time to renew, and you will want to keep them until they are replaced.

You should retain lease and business loan documents that pertain to tax deductions for the seven-year period described earlier. Keep records of satisfied loans for seven years also.

You needn't keep bank and credit card statements longer than a year, unless they contain entries that you are using for your tax filing. If they do, follow the rules for tax documents discussed earlier.

What About Electronic Records?

In today's digital age, both paper and electronic records are acceptable forms of documentation. Make sure that records you have scanned into your computer files are legible, however.

The IRS recommends you back up your paper documents electronically in case of flood, fire, or other disaster. Choose a method of electronic storage--whether on your computer, in the cloud, or on a thumb drive or external hard drive—that offers the most safety and security against identity theft. Make sure your computer is password protected, and consider using an encryption program like Microsoft BitLocker, Apple FileVault, or a third-party program. Choose a well-protected cloud storage program, and use a unique and complex password with two-factor authentication.

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