Financial Records: What to Save and What to Shred

If you store financial records, you have sensitive information that could be exploited if it falls into the wrong hands. Should that happen, you could be liable for the repercussions.

You need to deploy secure methods to store the data you keep and destroy any information that is no longer needed. This approach is the best way to keep all financial information safe.

The problem is that it can be difficult to discern which items you should keep and which ones should be destroyed via shredding. There’s no single answer. It depends on the specific financial records you have.

What common financial documents should you be shredding, and how often?

Payroll Tax Records

Payroll tax information includes:

• Copies of paystubs
• Benefits payments
• Timesheets
• Employee data

Per the IRS, you should keep payroll information for at least four years. At that point, it can be shredded.

Company Tax Returns

Company tax returns include:

• Tax forms
• Tax returns
• Receipts
• Other supporting documentation used to calculate and pay taxes.

The IRS requires that you keep these records for three years. However, they can audit you going back up to seven years. Because of this, most businesses retain tax data for at least that long. After that time limit, these records should be properly destroyed.

Financial Statements and Invoices

Other Financial Statemetns may include:

• Invoices
• Bank statements
• Other financial records that may not fit into any other category

You should keep these types of “other” documents and records for seven years. However, it is okay to shred monthly statements annually, as long as you retain accurate and detailed yearly records.

Paper vs. Digital Records

If you choose to store your business records digitally, you will save space, but know that you’re still responsible for ensuring proper data security and disposal.

This responsibility means having hard drives and other hardware destroyed via shredding or thoroughly wiped. You will also need to perform this step if you transfer records from one device or format to another.

What About Third-Party Storage?

What if you use a payroll company, accounting service, bank, or cloud provider to store all of your financial records? Does that mean you’re off the hook? Not necessarily. You still need to follow up to learn what their retention policies are and how they choose to dispose of data.

Make sure that you are comfortable with their policies. For example, if your bank destroys statements after three years and you prefer to keep them for seven, that’s a problem. You will need to make arrangements to store documents according to your own best practices and regulations.

Expert Help with Financial Data Destruction

SEAM (Secure Enterprise Asset Management) can provide you with guidance as well as paper shredding and hard drive shredding or wiping services. We work with businesses in North Dakota and South Dakota to ensure proper record destruction and other data destruction in accordance with our certifications and industry recongized standards. Contact us for help with your company’s financial records