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Ready to Purge Paper Files? Know the Legalities that Affect Your Industry

By Higher Information Group on December 2, 2023 | Document Solutions

Cleaning out feels great, doesn’t it? It’s liberating! Plus, keeping paper files organized and secure is kind of dull. But before you go crazy tossing or shredding records, make sure you understand the guidelines associated with different kinds of documents. This will most certainly help you avoid problems down the road.

First, if your business doesn’t already have a records retention policy, it’s a good time to establish one and make it something that you commit to reviewing at least annually.

The Internal Revenue Service (IRS) provides some standard record-keeping rules for tax documents. Beyond that, there are not many hard and fast rules on how long to keep business paperwork. Professionals like accountants and attorneys often recommend keeping original documents for at least seven years. But does that apply to everything?

Here are some general guidelines, but always consult a professional for specific recommendations that apply to your business, industry, or specific situation.

Business Tax Returns

The IRS requires that businesses keep tax returns and supporting documentation until they can no longer audit a tax return. In the U.S., the IRS has three years to audit a tax return; however, that can extend to six years if they suspect an error OR seven years if there is a claim for bad debt. This is why it’s generally understood that if you keep tax returns and the supporting documentation for seven years after the filing, that is sufficient.

Payroll Tax Records

Employee tax records should be kept for a minimum of four years from the time you file the tax return or pay the taxes. These records include timesheets, wages, pension payments, benefits, tips, etc.

Human Resource Files

Files for current employees should be kept until at least seven years after the employee leaves the company or is terminated. If an employee is injured on the job, that employee’s records should be retained for ten years after the claim is resolved.

How you handle information on job applicants is impacted by several federal anti-discrimination laws. Learn more about the requirements impacting applicant documentation here.

Financial Records

Financial professionals typically recommend that businesses maintain accounting records like financial statements, business ledgers, budgets, and audit documents permanently. Documents like credit card statements, bank account statements, invoices, expense reports, etc. can follow the seven-year guidelines.

Ownership Records

Documents like deeds, titles, major contracts, articles of incorporation, etc. – are the types of documents that should be retained permanently.

Industry-Specific Records Retention

Depending on your industry, many organizations must abide by certain federal and state mandates regarding their records retention in order to remain compliant. These can vary by state and industry but should be clearly outlined in your records retention policy.

Healthcare Organizations

A variety of factors impact medical records retention regulations. To find regulations for your state, consult this table provided by healthIT.gov.

Financial Institutions

Regulatory compliance in record-keeping for financial institutions is incredibly complex. There are a multitude of banking laws that have specific document retention requirements, including The Equal Credit Opportunity Act, the Truth in Lending Act, the Electronic Funds Transfer Act, the Bank Secrecy Act, and many others.

Educational Institutions – Schools are also required to maintain records on students, transcripts, to document their participation in certain programs, etc.

All organizations carry the burden of responsibility for understanding and complying with the retention and destruction policies that govern their industry or business area. Retention policies go far beyond just eliminating paper and saving space. A reliable retention policy will help your organization maintain compliance with federal, state, and local regulations.

Not sure where to begin? Consult with our team of document digitization, storage, or secure destruction experts!

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