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What Records Should You Keep And For How Long? (Online-Only Article)

By: Shanna Morales, CPA*

In advising our doctor-clients, we often get asked about the types of receipts and records they should keep for proof of their business deductions.  In this article we’ll give you the information to help you protect your deductions and prove your information on your returns.  We also want to give you a record retention policy for multiple types of records and the easiest way to keep these records.

Substantiating Your Income

From deposit records for your bank accounts to credit card 1099-Ks to insurance 1099-MISC, you get the basic information you need to substantiate your income and deductions each year from a variety of sources. Vendors you work with, for example, give you the basics for your expense deductions each year in invoices, receipts, and purchase documents that show the vendors name, date, and amount you have spent on the item at hand.  For a dental practice, the income you receive will mostly be substantiated by your bank deposit slips and bank statements. The collections report of your dental practice software is what you actually will use for income purposes, not your practice production report. The collections report should be close to what your bank statements report.  For expenses, canceled checks, bank debit receipts, credit card receipts, and invoices will most likely be the records you will want to keep. Your bank statements, credit card statements, and invoices will also give you the information you need to help substantiate these deductions. 

Staying Organized

Organize information related to income and expense items using a business accounting software, such as QuickBooks.  You need a system to organize paper receipts/invoices, such as by month or year.  As these records – and the mounds of paperwork – grow, you need to determine what you should keep and what you need to shred.  It is rare that you will need to retain all items “just in case.” If possible, keep items in a digital format to save space.  Consult your legal advisor on whether you need the hard copy or not.  If a digital copy is all you need, you can use cloud storage or an external hard drive. Just be sure that all items are in compliance with the new HIPAA regulations.

Record Retention Policy

Keep records for as long as they are useful, keeping in mind state and federal regulations, as well as any specific industry standards.  The guidelines below are intended to be general in nature and do not include all types of records that you have in your files:

Retain Permanently:

  • Certified financial reports
  • Board minutes
  • Covenants and restrictions
  • Canceled checks for important payments (i.e. taxes, property purchases, special contracts)
  • Reserve studies
  • Deeds, liens, mortgages, bills of sale
  • Depreciation schedules
  • Financial statements
  • Insurance records
  • Property records
  • Tax returns

Retain Temporarily:

  • Account ledgers (7-8 years)
  • Bank reconciliations (7 years)
  • Bank Statements (3 years)
  • Canceled checks (7 years for tax deductions, unless meets the requirements above; see “Retain Permanently” section)
  • Employment applications (3 years)
  • Employee personnel records (7 years)
  • Expense reports (7 years)
  • Invoices (7 years)
  • Records of assessment (7 years)
  • Payroll records (7 years)
  • W-2 and 1099 forms (7 years)

Any records that are to be retained permanently should be retained on-site, or in your home office.  These records have lasting historical, legal, and/or financial significance for your business and maintaining control of them is important. Before destroying any records, consult your certified CPA and/or attorney.

Download a full list of items we recommend for business records retention.

Download a full list of items we recommend for personal records retention.

For more information, see IRS Publication 583, Starting a Business and Keeping Records.

* Shanna Morales is a CPA with Elliott Davis, PLLC (Dental Services Practice), a firm that specializes in providing accounting and bookkeeping services to the dental profession. For more information call 704.808.5232.


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