The legal requirements for the retention of documents

Written by peter lancett
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The legal requirements for the retention of documents
You have a legal obligation to retain certain documents. (documents image by AGITA LEIMANE from

Many business and personal activities generate documents. Some documents are important to various government agencies, such as the Internal Revenue Service or the Customs and Border Protection agency, and the United States has laws governing which documents must be retained, and for how long they must be retained.

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Customs Duty Records

When goods are imported into the United States, any packing lists detailing the items being imported in a specific consignment must be retained for 60 days following the release of the goods from CBP custody. Goods are usually held in custody pending the payment of import duties. All other documentation must be retained for a period of five years from the date of entry of the imported goods. Records relating to the import of duty-free goods need only be retained for two years from the date of entry of the goods into the United States.

Unreported Income

If you have income that you do not report to the IRS, and the amount of the unreported income makes up more than 25 per cent of the income that you did report on your tax return, you have to keep all the documents relating to that tax return for at six years. This may happen if you are unsure whether a particular portion of your income has to be reported. You can then legally report this income if you subsequently discover, within the six-year period, that you should have reported it.

Business Tax Records

If your business employs staff, the IRS requires you to retain all employment tax records relating to employees for four years after the tax is paid, or becomes due, whichever date is later. Your business tax records and all related documents must also be kept for a period of three years from the date you filed your return, if you are claiming a refund after you have filed it. If you have already paid tax on a return, and you subsequently claim a credit or refund against that return, you must keep the return and all related documents for two years from the date when you paid the tax. If you file a fraudulent return, or fail to file a return, you have to keep all records related to the return, or the tax period, indefinitely.

Tax-Exempt Bonds

Holders of Treasury and municipal bonds do not have to include interest paid on the bonds with their tax returns; this income is tax-exempt according to section 103 of the IRS tax code. However, IRS tax-exempt bond inspectors may need to examine bond transactions and payments to make sure that the bonds actually do qualify for tax-exempt income status. Records of tax-exempt bond transactions must be kept up to the date when the bonds mature and the loan capital is repaid, plus three years after that date.

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