Setting a document retention policy for a business is no simple task because, generally, there are no specific rules. In many cases, retention policies are based on years of “best practices.” What does come into play is where there is an applicable statute of limitations, a legal requirement defining how long a record should be retained. For example, the statute of limitations for income tax returns (the amount of time the IRS can go back and audit the return) is generally three years, or possibly six years if there is a significant understatement of income. Most experts also recommend adding a year; therefore, tax records should generally be kept for seven years. It is recommended that the actual tax return be kept indefinitely. Another example is that the Occupational Safety and Health Administration (OSHA) requires reports of work-related injuries to be kept for up to five years. Retention requirements may also vary by industry. It is important to speak with your company’s attorney when developing a policy.
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