Record Retention Guide
Know about Storing Tax Records
It is advisable to keep all the records and document regarding Self Assessment tax return sent to the HM Revenue and Customs (HMRC). Though there are no such rules regarding keeping the records, it is better to store them at least for one year that is until the next assessment year.
There are some details and records which you need to fill your tax return correctly. Sometimes it happens the HM Revenue and Customs checks the information and due to any susceptible reasons, they might ask you to show the documents again. Apart from that, a self-employed entrepreneur needs to keep those tax documents for business income and outgoings as well.
It is not a part of legal formality and there are no such rules established by the government. There is not even any prescribed mode of keeping the documents are suggested by any authority. You can store the tax records as per your convenience like digitally, writing on a paper or you can put it on your book-keeping software program for a future use.
You may be charged a penalty if the records presented by you are not in a readable form, or improper, or not accurate or complete.
If due to any reason, you have lost or destroyed the tax records, then put all your efforts to get it back. At least you can try to get back the records like copies of bank statements from your bank and can regenerate duplicate copies of invoice etc.
For regenerating the lost document, you can use the โprovisionalโ and โestimatedโ figures. The โProvisionalโ figures signify that you are going to reproduce the figures later, while the โEstimatedโ figures refer to you wonโt be able to present the or confirm the figures any day.
If you are found to be wrong in presenting the figures, then you may subject to pay interest and penalties.
Most people think the tax document is of no use once they are done with the tax return filing activity. But in fact, you need to keep them with utmost care for next three years at least. Federal law may need you to present your tax returns and supporting documents for last three years as per the three yearsโ law. In case of a fraud, you may need to produce even six yearsโ document. So it is better to keep a habit to retain the documents for such period of time.
Sometimes, the IRS under suspicion can ask you to produce six yearsโ tax documents for an audit. So use the techniques and be on a safer side. Keep all the Tax related documents for six years for both business and personal records.
Special Circumstances of Identity Theft
We are aware of the situation of the current world. Now the planet moves with the advancement of computer and technology and we are getting much addictive to the same. Almost for everything, we depend on computer and the internet. Thus we are more exposed to cyber attack. It involves credit card theft, fraud and identity theft, spam, and phishing. Yes, it is a crime and recently the threat of cybercrime has increased rapidly, targeting citizens, businesses, and entrepreneurs.
Cybercrime endangers the individuals and organizations and business owners not only all about their financial damage but also about their personal privacy as well. So it is better to take precautionary steps to save your business from the same. So be careful and keep your eyes open always. There are some tips which should be considered in order to maintain a safe practice.
Always make it a habit to dispose of all your finance,ย bookkeeping and tax recordsย once you donโt require it anymore. All the financial statements, your tax records or documents containing your personal information should be disposed of through shredding and not by just throwing them away in the bin.
Below is a list of different types of important documents of business and personal nature which should be retained by the organization for different period of time.
All the Important Business Documents that should be kept for three years.
The essential Business Documents includes
- Bank Reconciliations and other Statements
- Employment Applications
- Individual Employee Personnel Records
- Job offer letter
- General Employee Correspondence
- Copy of Expired Insurance Policies
- All the Vouchers for Petty Cash Expenses
- Documents related to Internal Audit
- Stock Taking Report and Physical Inventory reports
- Internal Business Reports
- Hourly Employees Time Cards For wage calculation
- Records of Employees and their remuneration
All the Important Business Documents that should be kept for six years
The Significant Business Documents includes
- Reports regarding any type of accident, claims or theft
- Checks Cancelled
- Payable Ledgers Accounts
- Receivable Ledgers Accounts
- Tax Records of Employees
- Bond Certificates and Cancelled Stock report
- Lease, let out and Expired Contracts
- Expense Reports
- Supplies and Materials Inventories records
- Expense Analysis and Distribution Reports
- Summaries and Payroll Records
- Expired Option Records
- Payment to Pensioners
- Customers Invoices
- Plant Cost Ledgers
- Receivable Ledgers and Schedules
- Copies of Purchase Orders (for purchase department)
- Employee benefit plans
- Sales Records
- Subsidiary Ledgers balances
- Medical reimbursement
- Travel and Entertainment Records
- Vouchers for Payments to Vendors,
- Employees Insurance Plans
- All Important Register and Voucher
All the Important Business Documents that should be kept forever
The Crucial Business Documents includes
- Accountants Audit Reports
- Charts of Accounts and Cash Books
- Tax payments Cancelled Checks
- Corporate Documents regarding incorporation and commencement of the company
- Records of all current Contracts
- Structural Capital changes report
- Documents regarding any constructional changes
- All Legal Deeds
- Fixed asset additions report
- General and Private Ledgers,
- Schedules for Depreciation report
- Income statements
- Financial Statements of the business
- Claims and Policies regarding Insurance and Current Accident Reports,
- Year-End Trial Balances and balance sheet
- Agentsโ Tax Revenue Reports
- Trade Investment Confirmations
- Minutes Books of Stockholders and Directors
- Journals and Legal Records,
- Papers of Mortgages and Saleโs Bills
- Inter and Intra Correspondence and circulars
- Property Appraisals report
- Evidential report on other Important Matters
- Employee Retirement and Pension Records
- Real Estate Report and Property Records
- Worksheets and Tax Returns Records
- Copyright, Patent, and Trademark Registrations
Personal Document a business need to maintain for a period of One Year
- If you are storing tax related annual document, then you can avoid keeping the monthly and quarterly statements regarding the same.
Personal Document a business need to maintain for a period of Three Years
- Bills and Credit Card Statements
- Expired Insurance Policies report
- Utility Records
- Insurance disputes reports and Medical Bills
Personal Document a business need to maintain for a period of Six Years
- Tax Returns reports and Supporting Documents
- Tax and Insurance related Medical Bills
- Claims and Accident Reports
- General Sales Receipts
- Property tax Records
- Tax-Related Bills and documents
- Wage structure change Reports
Personal Document a business need to maintain Forever
- Legal Records
- Income Tax Returns documents
- CPA Audit Reports
- Checks and documents of Income Tax Payment
- All Vital Business Correspondence
- Employee Pension and Retirement Records
- Investment Trade Confirmations reports
- Car Records book
- Documents for Special Circumstances
- Documents regarding Leases, Mortgages, and Deeds
- Statements and Credit Card Receipts
- Property Records
- Life Insurance Policies report
- Stock and Bond Records
- Sales Receipts
- Warranties and Instructions for important products
- long-term Investment Records
- Capital Asset Records
- Depreciation Schedules to calculate tax life of the asset
- Other important business Bills
