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Expert advice: Understanding document retention requirements for small businesses

Managing financial records can be overwhelming for small business owners. The question of whether to hold on to records for too long, long enough, or not long enough can be confusing.

To avoid any complications, it’s best to consult a CPA or professional to understand the record retention requirements for certain organizations or entities.

Courtney Kincaid, President and CEO of the Indiana CPA Society, recommends developing a system for document retention that’s well-documented and understood. This is critical for business continuity and growth.

When it comes to document retention, various considerations arise, such as paper versus electronic in the post-COVID world.

Paperless environments are becoming more common, but sometimes small businesses lack the equipment to digitize documents to meet requirements. It’s essential to work with a CPA to understand what record retention requirements might be for certain organizations or entities.

When it comes to taxes, the IRS suggests keeping all returns and related documents indefinitely, but most CPAs keep documents for a minimum of three years from the date of filing with taxes.

Retention policies for state returns may differ, so it’s important to check with a CPA to know what the retention policy is for your local area.

At the beginning of an engagement with a CPA firm, it’s a good idea to discuss their record retention policy. In case of any confusion or query, consumers can contact the ethics hotline for assistance.

Be sure to consult with a CPA or professional to understand the specific record retention requirements for your business. Watch the full interview above to learn more information.