What is Document Retention
Document retention refers to the practice of systematically storing and maintaining important documents and records for a specific period of time, ensuring compliance with legal and regulatory requirements, as well as for facilitating proper record-keeping practices within the industry.
Document retention primarily preserves and safeguards various types of documents, such as financial records, tax returns, and supporting documentation. These records are retained for a specified duration to meet legal obligations and potential audit requirements. For instance, federal law mandates individuals and businesses to retain copies of tax returns and supporting documents for at least three years. However, in cases of suspected underreported income or fraud, the Internal Revenue Service (IRS) may extend the audit period to six years.
It is recommended to create backup sets of documents and store them electronically to ensure the accessibility and availability of records. This includes converting paper-based records into a digital format, enabling easier storage, retrieval, and protection against physical damage or loss. Additionally, Document Retention emphasizes the secure disposal of records containing personal information to prevent identity theft. Shredding tax records, financial statements, and other sensitive documents is advised rather than discarding them in regular trash bins.
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