Keeping payroll, HR and financial records indefinitely dramatically increases the risk of identity theft by hackers.
Shred sensitive documents no longer needed and wipe them off computers, printers, copiers and other equipment. Don’t rely on using File Manager because they do not insure that the wiped data cannot be hacked. Be especially careful if your business donates, sells or returns leased equipment to other organizations.
Outside vendors that manage asset disposal can help, but they also pose risks. Choose a vendor that:
· conducts background checks on employees;
· offers risk indemnification;
· tracks assets during the disposal process; and
· disposes of your equipment in an environmentally responsible way.
Minimizing unnecessary storage
There are different guidelines for how long to keep business v. personal data:
Retain records that support items shown on your tax return at least until the statute of limitations runs out — generally three years from the due date of the return or the date you filed, whichever is later. However, there’s no statute of limitations if you fail to file a tax return or file a fraudulent one. So you’ll generally want to keep copies of your returns themselves permanently, so you can show that you did file a legitimate return.
· Employee records—keep for 3 years from termination.
· Employee earnings records—keep for at least 4 years after termination. For records involving unclaimed property, such as an unclaimed paycheck, check state laws.
· Timecards—keep for at least 3 years if your business engages in interstate commerce (i.e. is subject to the FLSA); at least several years, regardless.
· Employment tax records—keep for 4 years from the latter of the date the tax was due or the date the tax was paid.
· Travel and entertainment records—keep mileage logs, receipts and other supporting documents for 4 years (IRS rules).
· Sales tax returns—keep as long as state law requires.
· Business property—keep records that substantiate costs and deductions (purchase, depreciation, amortization and depletion documents) until the asset is sold, traded in or disposed of plus 7 years, according to IRS guidelines.
When in doubt, don’t throw it out
It’s easy to accumulate a mountain of paperwork (physical or digital) from years of doing business. If you’re unsure whether you should retain a document, a good rule of thumb is to hold on to it for at least six years or, for property-related records, at least seven years after you dispose of the property. But, again, you should keep tax returns themselves permanently, and other rules or guidelines might apply in certain situations.