One of the questions I receive most frequently is how long should records be retained.  It’s a good question. We often have too much stuff and rather than get rid of the shoes we don’t like or the pants that no longer fit, we try first to reorganize by getting rid of excess paper.

Paper seems to have biological properties. Put two pieces together on a table and soon you have ten, which then mate and create twenty more. Nothing multiplies like paper, not even rabbits. Paper also attracts dust. Have you noticed how the coffee table is always spotlessly clean until you pile paper onto it?

I tend to clear out the paper clutter in the spring. It became part of my spring cleaning routine as a matter of course. In addition to connecting to the post-winter cleaning ritual, spring is also post-tax season and the records won’t be needed again - we hope.  So it is time to put them away.  And when we attempt to put documents away, we discover that we have piles of records from previous years.

My accounting firm recommends that tax returns and the documents supporting them be retained indefinitely. This is not in anticipation of an audit. It is because the laws constantly change and you may need a piece of information from earlier years to take advantage of something currently available.   This is particularly true for real estate and investment transactions.

So what can you throw away?  Anything that doesn’t pertain to your tax returns or company. That will vary from individual to individual. Here are some links to guide you. 

• http://www.irs.gov/businesses/small/article/0,,id=98513,00.html
• http://www.irs.gov/publications/p552/ar02.html
• http://bestbizpractices.org/2009/09/16/record-retention-requirements/

Remember that, thanks to digital technology, you can store copies of your records on digital media. A flash drive or CD takes a lot less space than a file folder.  If you have access to a scanner, this may solve your problem.

In addition, when in doubt, double check with your tax adviser. He or she should be an expert on the topic.

Happy spring cleaning.