The VSCPA intends the following schedule to be used only as a guide. Retention periods are conservatively long and are suggested with federal requirements in mind. Be sure to check with local and state authorities for specific requirements.

Record retention is a must, whether for personal, business or tax reasons. However, record retention is necessary only to the extent it serves a useful purpose or satisfies legal requirements. For example, generally the IRS must assess additional tax within three years, the period is six years if the taxpayer omits items of gross income that in total exceed 25% of gross income reported on the return.  If a fraudelent return is filed or if no return is filed there is no limit to the periods the tax can be assesed. In practice, most individuals and businesses retain records based on available space. Many accounting firms maintain permanent files for their clients. In a permmanent file, such legal documents as will, leases, employment agreements and debt information will be obtained. In addition, other pertinent tax documents such as Subchapter S election approval or Keogh plans may be kept in this file. Non-tax records that an accountant has performed an audit should be retained until no known legal action can be filed. This time period varies from state to state and according to whether the action alleges contract or tort damages. Seven years, in most states, would be satisfactory for retention. Permanent files are not unique to accounting firms alone, other businesses can also benefit from the establishment of permanent files.

Advanced technology has somewhat  eliminated the inconvenience of retaining records. The use of microfilm can condense reams of paper to the size of a single sheet. Microfilm is not without disadvantages - it is relatively expensive, non-billable to clients and once the system is adopted, it generally becomes permanent. 

Individuals, businesses and accounting firms facing record retention must answer two questions:

1. What must I keep?
2. How long do I have to keep it?

Below are charts devised for individuals, businesses and accounting firms. These charts may be used as a guideline for most records but be sure to check local and state requirements. Detail on many aspects of record retention, including tax records can be found in The Guide to Record Retention Requirements in the Code of Federal Regulations. A publication available from the Superintendent of Documents or from Commerce Clearing House.

Record Retention Schedule