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"How long do we need to keep certain records and what do we need to keep?"

The federal tax laws require taxpayers to maintain books of account or records to support amounts reported on tax returns. The general rule is that such books and records must be kept as long as they may be relevant to a taxpayer's claim for a tax credit or refund or to an IRS attempt to assess additional tax for the year in question.

The specific rules relating to the length of time such books and records must be kept are quite detailed. Following is a list of recommended retention periods published in one of our financial and tax services that can be used as a general guideline. In some cases, the retention period recommended may be for nontax reasons--for example real estate records should be kept forever for environmental liability exposure reasons.

	Copies of tax returns as filed	Forever
	Tax and legal correspondence	Forever
	Audit reports	Forever
	General ledger and journals	Forever
	Financial statements	Forever
	Contracts, leases & real estate records	Forever
	Corporate stock records and minutes	Forever
	Bank statements, deposit slips & cancelled checks	7 years
	Sales records and journals	6 years
	Other records relating to revenue	6 years
	Employee expense reports and records relating to travel and entertainment expenses	6 years
	Paid vendor invoices	6 years
	Employee payroll expense records	6 years
	Inventory records	6 years
	Other records relating to expenses	6 years
	Depreciation schedules & other capital asset records	Tax life of asset + 3 years

If the IRS can show a significant understatement of gross income on the return, the statute of limitations can be extended from three to six years.