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Do you have a tax question that is driving you crazy? Tax expert Adam Berebitsky of SS&G Financial Services has the answers. Send your questions to msanson@penton.com and we’ll pass them along to Adam. In the subject line of your email, write Tax Talk Question.
We keep a significant amount of our invoices, receipts and tax filings in our storage area. How long should we keep all the paperwork for our restaurant?
You are not unique in your situation. Most restaurants still maintain a significant amount of paper records, even with the advent of electronic storage. I believe it’s important to establish a record retention policy and then, based on the guidelines below, regularly purge records to minimize storage needs.
Federal and state statutex of limitations are what normally determines how long to keep financial records. While federal agencies have record retention guidelines, there is no statute which requires you to retain records for any length of time. Since federal tax returns can generally be audited for up to three years after the filing date, and up to six years if the IRS suspects underreported income, you should keep tax records at least seven years after a return is filed. However, if there is no concern that your restaurant has underreported income, then four years ( current year and past three years) of records should be kept and stored.
In the restaurant business, good record-keeping is essential not only for tax reporting purposes, but also for the success of the company. I recommend that you utilize your point of sale, back of the house and accounting systems not only to retain financial records, but to pull data for benchmarking purposes.
If you would like to review a standard record retention guide, please email me and I will forward a copy.