record retentionFor many industries, document retention is critical to the security of the business. Every company should have a retention policy detailing the life span of their documents. A retention period is the amount of time a document should be kept, in both paper and electronic form. The length of time is often industry specific and dependent on the documents likelihood of being used for litigation purposes in the future. Some documents have a permanent retention period while others have a life span of a few months to a few decades. Once the retention period is up, the document should be disposed of properly.

Document Retention Laws

There are various federal and state laws regarding document retention and disposal. In 2002, the Sabarnes-Oxley Act was passed which put many restrictions on how a business manages their documents. HIPAA is another federal law that dictates how medical facilities are to handle the health records of their patients. The majority of states have laws and requirements on document retention. California, in section 19404 of its revenue and tax code, set regulations on how long to retain tax records (6 years for income taxes). California Code of Regulations, Title 8 also gives guidelines on retaining employee health records. In Illinois, the State Records Act regulates documents and how they are to be disposed of. New York State has the MU-1 Records Retention and Disposition Schedule that sets requirements for record retention before disposal for all government offices.

Guidelines have been set for how long different documents should be retained. There are strict retention periods every business should follow. Here are some general retention periods for common business documents:

Document Type Retention Period (years)
Bank Statements 4
Contracts 6
Employee Payroll Records 6
General Ledger Permanent
Invoices 4
Financial Statements (Interim) 4
Payroll Journal 4
Patents, copyrights, trademarks Permanent
Time Cards 4
Worthless Securities 7

 

 

 

 

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Please be aware that this is a general list. Retention periods may vary depending on the state and industry your business is in.  You should always consult legal guidance before following any of the information given here.

Industry Specific Document Retention

Each industry has its own regulations. Here we will focus on only three major industries: accounting, medical, and legal.

Accounting:

The IRS has set retention periods on tax documents. In general, you should keep records that support an item of income, deduction, or credit on your tax return until the return’s period of limitations runs out. The period of limitations in most circumstances is three years and can be up to seven depending on certain circumstances. Again, please consult a professional accountant before following any of the material given. Here are some other retention periods for accounting documents:

Document Type Retention Period (years)
Annual Financial Statements Permanent
Budgets 2
Business Income Tax 6
Cancelled check (income taxes) Permanent
Employee expense records 7
Filed Income Tax Returns Permanent
Internal Reports 4
Payroll Tax Returns 4
Sales and Use Tax Returns Permanent

Medical:

Every state has set retention requirements for medical records. All medical businesses should review the specific standards set by their state. However, here are recommended retention periods from AHIMA:

Document Type Retention Period (years)
Disease Index 10
Master Patient/Person Index Permanent
Operative Index 10
Physician Index 10
Patient health and medical records 10 years after most recent visit
Patient health and medical records (minors) Age of majority plus statute of limitations
Diagnostic Images 5
Diagnostic Images (minors) 5 years after age of majority
Register of births, deaths, or surgical procedures Permanent

Legal:

Potentially, the best course of action is to retain all legal correspondence as currently, federal guidelines are lacking. The retention period for court documents also changes by state. The time can vary between days to six months to ten years to fifty years. The American Bar Association has created the Modern Rule which sets standards for how a lawyer is to retain their client’s legal documents after a case is closed.

Many states have changed their record retention requirements since the creation of these rules. Depending on the state, lawyers are required to retain records for either six or seven years but some states are more flexible. Please consult with a lawyer in your own state or do your own research to ensure your firm is following the proper record keeping requirements before following any of the counsel given in this article.

Document Retention Schedule

retention schedule

Retention policy is clearly an important aspect for many industries and businesses alike. A retention policy is just the first step though to managing all your documents. Eventually, a document will reach the end of its life span and it will have to be disposed of properly. Guidelines have also been set as to how to handle these records.

In many cases, documents are of too high security to just be recycled or archived. Document shredding may be necessary to properly dispose of paper records. Improper destruction of records could lead to fines and other penalties set by federal and state laws. Shred Nations can help you find a shredding contractor to handle all your document retention needs.

For permanent records, document scanning may be a good solution. Storing paper documents for a number of years is going to take up space. An effective and secure way to retain your documents while also saving space is to use an electronic document management system. We can also help you find a document scanning company that can convert all those paper documents to electronic records.

If you would like more information about document retention, shredding, or scanning, please call us at Shred Nations at (800) 747-3365 or fill out the form to the right.