The period of time you should keep a document depends on the action, expense, or event which the document records. Generally, you have to keep records that hold an item of income, deduction or credit shown on your GST tax return until the period of limitations for tax return runs out.
If we consult lawyers, accountants, banks and government agencies all seem to have different ideas about how long to preserve business records depending upon your individual business conditions. In this digital world, both paper and electronic documents must be considered in your record security plan.
The records you need to keep for your business:
- Receipts and Bill received- Recording of receipts and bill received have to be important for business. These are the records of expenses that your business incurs. These can be hardcopy receipts that you get when you go to the store or digital receipts that you receive via email.
- Business tax returns- You need to hang onto your business tax returns and all supporting documentation until you can no longer be audited for that tax year. It makes sense to keep a final copy of your business income tax returns and related correspondence with the IRS permanently to help you prepare future or amended returns.
- Employment tax records- It is must to keep records of your business. Likewise, you have to keep records of your employees. These employment tax records include such items as your employer identification number, amounts and dates of wages, pension payments, and tax deposits, the names, addresses, dates of employment and occupations of employees and records of allocated tips and fringe benefits.
- Bank and credit card statements- you should and need to keep bank and credit statements for at least 3 years. It is essential because if you have some problem with your statements and you don’t have it so it creates some difficulties for you.
- Business asset records- Business asset records will help you in calculating applicable depreciation, amortization deductions and to determine any gain or loss on that property. If the business property is real estate or a vehicle, keep the deed or vehicle title in a safe, secure spot until you sell or otherwise properly dispose of that property.
- Tax return and document- When we say tax return and document so it includes all the taxes and related documents. The length of time you need to keep all these for is different than what we have reviewed with the other types of documentation. You need to keep your tax returns and related documents for six years.
- Business ledger and other key documents- Businesses need to keep their journal entries, P&L a/c, financial statements, check registers and general business ledgers permanently. Likewise, major business documents, like annual reports, corporate by-laws and revisions, a board of director information, annual meeting minutes and business deposit documents, should also be clutched on a permanent basis. Aside from supportive tax records, other documents such as accounts payable/receivable ledgers, invoices, and expense reports must be preserved for a minimum of seven years.
So the above points define that every business must record these reports and documents at least 3 years. You need to keep your business financial records. For that, you need free business software from which you can handle your records easily and you can access anywhere.