It’s tax time and you have piles of receipts, bank statements, tax forms scattered everywhere. If you work from a home office, filing space is definitely at a premium, so here’s a guide to what records you need to keep, what you can keep electronically, and what records you can safely shred and destroy.

Federal law requires that you keep copies of your business tax returns as well as your personal tax returns for three years, including all supporting documentation for those returns. The IRS calls this the “three-year law.” However, if the IRS thinks you’ve underreported your income by 25% or more, or thinks there may be fraud, they can go back six years for an audit, but the requirement to keep your records is indefinite . It is recommended that you keep copies of all your personal and business tax returns indefinitely. It is also important to note that the statute of limitation does not start until the tax return has been filed and if the return is found to be fraudulent, there is no limitation on when the records can be requested.

Below is a breakdown of the records you need to keep and for how long based on current IRS guidelines. Again, use common sense to make the right decision between keeping too many records or not keeping them long enough. If you have any questions about a specific document, check with your accountant or attorney before destroying it. You certainly don’t want to be caught without the requested documentation if the IRS contacts you.

business documents save for three years:

• bank deposit statements
• canceled checks
• Correspondence with clients and suppliers.
• credit card statements
• Employee personnel records (after termination)
• Job application
• expense report
• Expired insurance policies
• petty cash vouchers
• Physical inventory labels and records
• Purchase orders and receiving sheets
• requisition orders
• Time cards for hourly employees

business documents save for six years:

• Accident reports and claims
• Accounts payable ledgers
• Accounts Receivable Ledgers
• Bank statements and reconciliation reports
• Canceled stock and bond certificates
• Employment tax records
• Expense analysis and expense distribution schedules
• Expired contracts, leases
• Inventories of products, materials, supplies
• bills to customers
• Ledgers and notes receivable calendars
• Payroll records and summaries, including payment to pensioners
• Plant cost books
• Purchasing department copies of purchase orders
• sales records
• auxiliary books
• time books
• Travel and entertainment records
• Utility records (if tax related)
• Registration of vouchers, schedules
• Proof of payment to suppliers, employees, etc.

business records hold Always:

• CPA and/or accountant audit reports
• Canceled checks for important payments, especially tax payments
• Cash books, chart of accounts
• Contracts, leases currently in force
• Corporate documents (incorporation, articles of incorporation, bylaws, etc.)
• Wanderings
• depreciation schedules
• Fixed asset additions documents
• Financial statements, year end
• General and private ledgers, year-end trial balances
• Insurance records, including current accident reports, claims, and policies
• Investment confirmations and commercial statements
• IRS Revenue Agent Reports
• newspapers
• Legal records, correspondence and other important matters
• Minute books of directors and shareholders
• Mortgages, deed of sale
• Property appraisal performed by external appraisers
• property records
• Retirement and pension records
• Tax returns, forms and paychecks
• Trademark and patent registrations

Personal documents:

For one year:

• You don’t need to keep monthly and quarterly statements for mutual funds and IRS contributions. You need to save the year-end statements

For three years:

• credit card statements
• Expired insurance policies
• medical bills
• Utility Records

For six years:

• Accident reports and claims
• Medical bills (if tax related)
• Other tax-related bills
• Property records and improvement receipts
• Real estate: records of properties sold, contracts, receipts
• sales receipts
• Supporting documents for tax returns
• wage garnishments

Hold Always:

• CPA Audit Reports
• important correspondence
• Income tax payment checks
• Income statements and paychecks
• Investment confirmations and commercial statements
• legal records
• Retirement and pension records

special circumstances:

• Car registrations (keep until car is sold)
• Depreciation schedules and other capital asset records (keep for 3 years after the tax life of the asset)
• Insurance policies (maintain during the term of the policy)
• Mortgages, deeds, leases (keep 6 years beyond the contract)
• Pay stubs (keep these until reconciled with your W2)
• Property records, improvement receipts (keep until property is sold)
• Sales receipts (keep for the life of the product warranty)
• Stock and bond records (retain for 6 years after sale)
• Guarantees and instructions (maintain during the useful life of the product)

So now that you know what you need to save and throw away, can you scan those receipts and will an electronic copy be acceptable? The answer is yes. The IRS has accepted scanned receipts since 1997. The rule is Process Rev. 97-22 and states that your scanned or electronic records must be as accurate as your paper records. The IRS also states that you must be able to index, store, preserve, retrieve, and reproduce the records; Simply put, they require you to have your records organized and be able to produce them in print if needed. So before you start scanning receipts, make sure you have a system in place and back up your electronic records, especially if you shred and destroy the original files or receipts.

* Most states with an income tax withholding requirement require employers to maintain employee records and have their own minimum withholding period. Check with your state treasury department for the required retention period for employee-related records.