“Out with the old, in with the new” can be good advice when shedding bad habits, but not necessarily the wisest course to take when retaining important records. Maintaining tax documents and other financial records is important when preparing to file taxes or an amended return, or in the case of an IRS audit.
We have on our website a comprehensive record retention guide for a variety of documents pertinent to McDonald’s owner/operators, but we also advise retaining other important tax documents for several years.
- Tax returns and supporting documents at least three years.
- Employment tax records should be kept at least four years after the date that the tax becomes due or paid, whichever is later.
- Tax records should be kept at least seven years if a return claims a loss from worthless securities or a bad debt deduction. Copies of previously-filed tax returns are helpful in preparing current-year tax returns and making computations if a return needs to be amended.
Tax records should be kept safe and secure regardless of whether they are stored on paper or kept electronically. Paper records should be kept in a secure location, preferably under lock and key, such as a secure desk drawer or a safe. Records retained electronically should be backed up electronically and encrypted when possible.
Any paper tax and financial records should be scanned into a format that can be encrypted and stored securely on a flash drive, CD or DVD with photos or videos of valuables.
Disposing of records
Tax records contain sensitive data such as Social Security numbers, income amounts and bank account information. Tax documents not properly disposed of can land in the hands of criminals and lead to identity theft. Once past their useful date, records should be disposed of properly. Paper tax returns and supporting documents should be shredded before being discarded. Old computers, back-up drives and media contain sensitive data. Deleting stored tax files will not completely erase them. Using special wiping software ensures the removal of sensitive data.
As you know, our office operates electronically as much as possible to provide you the most secure and efficient service. Please let us know if you have any questions.