It is that time of year again! Time to look at your retention schedule and decide what needs to be organized. It is a love-hate relationship for some. Most organizations have filed taxes for 2020, making this a great time of year to think about whether older accounting records may no longer be subject to any retention requirements.

Everyone knows how important it is to balance your company books, but where do you even start? Start by determining what accounting documents you have and what your record retention requirements are. All businesses are required to keep accounting documents for certain lengths of time. Keeping your accounting records organized can save you time, money, and headaches every tax season.

What Documents Are Considered Accounting Documents?

Accounting documents describe a business’s transactions. Examples include general ledgers, bank statements, invoices, inventories, and receipts. Accounting documents are important for business and operational needs, but they are vital for audits.

U.S. Governmental Agency Accounting Documents.

If you are a U.S. governmental agency, the Internal Revenue Service (IRS) has adopted the General Records Schedules (GRS), which contain disposition instructions for administrative functions common to most offices. The GRS recommends businesses keep “financial transaction records related to procuring goods and services, paying bills, collecting debts, and accounting” and to “destroy six years after final payment or cancellation, but longer retention is authorized if required for business use.” [i]  Regarding an audit, the “IRS can include returns filed within the last three years . . .  If we identify a substantial error, we may add additional years. We usually don’t go back more than the last six years. [ii]

Accounting Documents for U.S. Business Entities.

If you are a business operating in the United States, retention requirements will differ depending on which state[s] you operate in. Many U.S. companies adopt the retention requirement found in California’s 18 CCR 19141.6, which states:

Records for any year must be retained for the longer of: the time during which the taxpayer’s franchise or income tax is subject to adjustment but not to exceed eight years from the due date or extended due date of return.

Accounting Documents for International Entities.

If your business has a presence in different countries, you could be looking at longer retention periods for accounting documents. To determine retention requirements among multiple countries, ARMA International has put together the Retention of Accounting Records: A Global Survey of Laws and Regulations, a summary of several countries, and their accounting retention requirements. On average, retention periods for accounting documents range from 3 to 10 years. Some companies increase these retention periods to 11 or 12 years to account for fiscal year requirements on top of the applicable base retention period. You will also want to research whether applicable countries have any archival order laws, as these can further increase accounting record retention periods. For example, Poland, Slovenia, and China have archival order laws that create significantly longer accounting record retention requirements.

Now is the right time of year to go through your business accounting records and dispose of any documents not required for legal, business operational, and practical storage needs. Your business will need to weigh the cost of keeping information that is no longer necessary for business operational needs to prevent potential litigation problems.

Are you unsure of which documents you can dispose of? If so, contact Zasio to assist you in identifying gaps in your retention schedule and answer any accounting record retention questions.




Disclaimer: The purpose of this post is to provide general education on Information Governance topics. The statements are informational only and do not constitute legal advice. If you have specific questions regarding the application of the law to your business activities, you should seek the advice of your legal counsel.

Author: Heather Houle, CRA

Author: Heather Houle, CRA

Senior Research Analyst / Certified Paralegal