Important Papers: Which Ones Should I Keep?

With tax day looming, everyone worries what papers are critical to keep and for how long. Do I really need that credit card receipt from five years ago? Can I throw away this year’s bank statements? Where’s my W2? If you’re a business owner, those worries magnify.

Here’s some guidance on what tax papers to keep, what to store digitally and what to shred:

What are the top six types of tax/financial documents a business owner should hold on to and for how long?

  1. Form 1040 and supporting documentation for business. Keep for 6 years. A scanned copy is sufficient.
     
  2. Small Business that is S-Corp or Partnership, Schedule K-1 to show your share. Keep for 6 years. A scanned copy is sufficient.
     
  3. Employee Records, Payroll Reports. Keep for 6 years. A scanned copy is sufficient.
     
  4. Partnership/LLC Agreement and any amendments. Keep a hard copy for the life of partnership.
     
  5. S-Corp acceptance letter and Form 2553. Keep for the life of the S-Corp. A scanned copy is sufficient.
     
  6. Any state local licenses required to operate your businesses. Keep hard copies. 

What three documents does it make sense to hold onto electronically even if a business owner doesn’t have to keep hard copies?

  1. Bank statements
     
  2. Legal agreements
     
  3. Copies of your federal and state tax filings

Which items should a business owner shred?

  1. Transaction statements that include sensitive data
     
  2. Other documents that contain personal data

Which items should a business owner keep under lock and key?

Titles, deeds and your will should be kept under lock and key because these documents are valuable and hard to replace.

Liberty Tax Service
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