RECYCLING YOUR RECORDS

Spring cleaning and tax time always seem to coincide, which inevitably leads to the question of what records your store needs to keep, and which ones it’s OK to get rid of.  I was about to say “throw away,” but that would of course be counter to the third special occasion coming up soon — Earth Day.  So let’s talk about what papers you can safely recycle, either shredded or whole, to make more room in your office files.

The IRS has very definite thoughts about what you need to keep around in case they decide to audit your business.  You can read all about it in Publication 583 (the IRS is so good at catchy titles). This electronic booklet has lots of helpful advice for setting up a record-keeping system, if you are new to the business world. But here is a quick summary of the “need to keep” section:

You should have documentation on hand showing your gross receipts, including cash register (or POS) tapes and deposit slips; your purchases, including invoices, credit card slips, and cancelled checks; and your expenditures. If you have made major acquisitions, you will need to have records of how these assets were acquired.  There are provisions for keeping computerized editions of these records, of course, but many of us store the paper versions in numerous bulky cardboard boxes.

How long do you really need to keep these records on hand?  According to the IRS, “You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out.   The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax.”

If you file a return on time, and it’s not fraudulent, the IRS would like you to keep most files for a period of 3 years, however they point out that payroll records must be kept for 4 years after the date the taxes are due or are paid, whichever is later.  Records relating to assets should be kept longer, since you may be taking depreciation on these items over a period of time.

Once you’ve reached the magical 3 to 4 year mark on paperwork that doesn’t relate to assets, it’s time to move those records out to make room for new ones.  If you feel that there is information in the records that could be used fraudulently, invest in a shredder (perhaps this hamster-powered one from England!) — or ask your bank to shred the items for you. There are also mobile shredding services that will come to your store, and others that allow you to send your materials to them via FedEx to be recycled.

It turns out that “document destruction” is a big business these days.  I’m all for it if it helps us keep our offices and storage efficient and clean.  But I do think a hamster-powered shredder looks like more fun that most weapons of mass (document) destruction, don’t you?

Happy Retailing,

Carol “Orange” Schroeder