Document Retention Policy

The firm retains copies of client documents and related documents, such as finacial statements or tax returns, for a maximum of 5 years after an engagement, whether tax or accounting, has been completed. For example, if a tax or financial engagement was completed in 2006, it would be permanently removed from our files in 2012.

Copies of tax returns can be regenerated from available software in certain instances, in a longer timeframe, but this is not a guarantee, as software and databases become corrupted and outdated. Also, certain documents and information cannot be retrieved with current technology due to changes in electronic platforms.

Clients who wish to retain their records for a longer period of time, are encouraged to do so if it enhances their peace of mind.

For Federal Income Tax purposes, documents that clients should retain for at least 4 years after the year of a return was filed are relatively limited. Those include documentation of costs of assets acquired for investment and costs of acquisition and improvements to personal residences. However, clients should retain copies of all tax returns filed forever. Generally, the supporting documentation can be destroyed after 4 years.

The IRS has three years after a return is filed to examine the items reported therein. However, this is extended to six years in the case of fraud, which is defined as not reporting 25% of gross income as shown as the Adjusted Gross Income on the return the year it was filed. For example, if a return shows Adjusted Gross Income of $100,000, 25% would be $25,000. If the taxpayer omitted $25,000 or more from the return, then the six year limitation period would go into effect.

Taxpayers should be aware that the burden of proof is upon the taxpayer to prove that all income was reported.