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Cpa client record retention requirements Form: What You Should Know

There are different types of records and, depending on your particular practice, it's possible to retain some and not others. Below are some examples of some specific types of records that are typically retained: Research and writing on which ideas have been formed Audits, reviews, and analyses of recent tax matters Research materials (e.g., memos, memoranda, charts, graphs, and reports) Examination of legal records — deposition, court documents, documents in administrative proceedings The goal of maintaining these documents is to be able to refer back to the information in order to provide additional guidance or to respond to questions about specific facts and issues in a case. In addition, the purpose of the retention periods varies. Some firms will retain documents for a specified time period while others may retain records for different amounts of time. Generally, the amount of time required for the retention periods of documents varies. Example: At a firm where each client's document retention period is two years, the firm may retain: • Two years' worth of clients' work papers • One year' end of year reports • One year' end of year tax returns These documents can be used or disposed of as needed. While there are no set rules, the amount and type of documents that must be retained varies depending on the nature of the documents and the type of information captured.  Example: A firm has a “no-new-content” policy. After a year or even until the end of the next calendar year, any new information that's needed or discovered during a period of time (such as an audit or analysis) must be reviewed by the firm and then either retained or discarded as needed. What is a record retention policy? A record retention policy is a written document that outlines the specific rules and procedure that your firm must follow. It establishes specific records that must be saved for a specific period of time. A record retention policy has to be followed by all of your tax-related clients. Is an audit or review of my clients' tax returns an audit or review? No. These are both terms that have very different meanings and the difference in what an audit or review involves is a key distinction in the rules. Is an audit or review relevant to the work they do for me? No. This is very simple. An audit or review is something done on behalf of another business or the client that needs to ensure a company's compliance with the law and regulations.

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A question I frequently hear is, how long do I have to keep records? I'll discuss some requirements outlined by the IRS to help answer this question. The period of limitations is the amount of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax or select you for an audit. The period of limitations is generally three years if a return has been filed timely, the return isn't fraudulent, and all gross income has been reported. The three-year span begins on the date of filing their original return or two years from the date the tax was paid, whichever is later. Records should be kept for seven years if there was a claim for worthless securities or a bad debt deduction. The IRS can request documents indefinitely if a return has not been filed or they presume fraudulent activity has occurred. Property-related documentation must be kept until the period of limitations expires for the year of property disposal. Some records should be maintained longer if needed for other purposes. Prior to disposing of records, contact relevant parties such as your insurance company or creditors. Businesses have a responsibility to substantiate entries, deductions, and statements made on the tax return. This is known as the burden of proof. The business must be able to prove certain elements of expenses to deduct them. The burden of proof is met by having documentary evidence to support expenses, such as receipts, canceled checks, or bills. Additional evidence is required for travel, gifts, and auto expenses, keeping in mind that the length of time varies depending on the action, expense, or event which the document records. Documents that support an item of income, deduction, or credit reported on your tax return are required to be...