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?
- Form 1040 and supporting documentation for business. Keep for 6 years. A scanned copy is sufficient.
- Small Business that is S-Corp or Partnership, Schedule K-1 to show your share. Keep for 6 years. A scanned copy is sufficient.
- Employee Records, Payroll Reports. Keep for 6 years. A scanned copy is sufficient.
- Partnership/LLC Agreement and any amendments. Keep a hard copy for the life of partnership.
- S-Corp acceptance letter and Form 2553. Keep for the life of the S-Corp. A scanned copy is sufficient.
- 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?
- Bank statements
- Legal agreements
- Copies of your federal and state tax filings
Which items should a business owner shred?
- Transaction statements that include sensitive data
- 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.