It's time to review (or create) your document retention policy.

• Author: Hering, Beth Braccio
• Position: Nuts & Bolts

Worried that your company might not have a particular document on hand if the IRS conducted an audit? Scared that producing relevant evidence in a former employee's wrongful termination lawsuit would be difficult because written warnings and performance appraisals are buried among mounds of other paperwork:

Smart businesses create a document retention policy that clarifies what needs to be saved, where and for how long. Sticking to a set record retention policy eliminates guesswork and promotes efficiency.

Businesses of all sizes should possess a written-out document retention policy. As a starting point, consider what these organizations say about some major types of records to keep and for what length of time:

Per the Internal Revenue Service

The length of time you should keep a document depends on the action, expense or event that the document records. Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out. The period of limitations is the period in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax.

Keep records relating to property until the period of limitations expires for the year in which you dispose of the property. If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later.

Keep copies of your filed tax returns permanently.

Per U.S. Citizenship and Immigration Services

Never dispose of a current employee's Form 1-9; you must keep it for as long as the employee works for you, and for a certain amount of time after they stop working for you. This requirement applies even if the employee ends employment shortly after you hired them. Only when an employee stops working for you should you calculate how much longer you must keep their Form 1-9. Federal regulations state you must retain a Form 1-9 for each person you hire for three years after the date of hire, or one year after the date employment ends, whichever is later.

Per the U.S. Department of Labor

Employers covered by the Family and Medical Leave Act (FMLA) are required to make, keep and preserve certain records pertaining to their obligations under the law. Employers must keep the records specified by FMLA regulations for no less than three years and make them available for inspection, copying and transcription by DOL...