For many industries, document retention is critical to the security of the business. Every company should have a retention policy detailing the lifespan of their documents from their creation to their destruction.
Laws dictate the length of time documents should be kept. Moreover, those laws help you minimize exposure to data theft and breaches.
What Is Record Retention?
A retention period is the amount of time a document should be kept, in both paper and electronic form. The length of time is often industry-specific and dependent on the documents’ likelihood of being used for litigation purposes in the future.
Some documents have a permanent retention period while others have a life span of a few months to a few decades. Once the retention period is up, the document should be disposed of properly.
Document Retention Laws
There are various federal and state laws regarding document retention and disposal:
Sarbanes-Oxley Act
In 2002, the Sarbanes-Oxley Act was passed which put many restrictions on how a business manages their documents. It broadly defines “records” as anything about the company that can be represented with words or numbers which means that there are a lot of records to be managed.
HIPAA
HIPAA is another federal law that dictates how medical facilities are to handle the health records of their patients. While it doesn’t have specific retention requirements, it mandates the protection and confidentiality of all health records. It requires that paper records and electronic media must be completely destroyed when their retention period is up so that the contents are unreadable.
California
In section 19404 of its revenue and tax code, California set regulations on how long to retain tax records (6 years for income taxes). California Code of Regulations, Title 8 also gives guidelines on retaining employee health records.
Illinois
In Illinois, the State Records Act regulates documents and how they are to be disposed of. In sum, it states that no record can be destroyed without the approval of the Illinois State Records Commission. Additionally, the head of an agency must establish and maintain an active and continuing retention program for the agency’s records. Lastly, the act authorizes the Illinois Secretary of State to provide records management expertise and technological assistance to State agencies.
New York
New York State has the LGS-1 Records Retention and Disposition Schedule that sets requirements for record retention before disposal for all government offices.
Guidelines have been set for how long different documents should be retained. There are strict retention periods every business should follow. Here are some general retention periods for common business documents. Please be aware that this is a general list. Retention periods may vary depending on the state and industry your business is in. You should always consult legal guidance before following any of the information given here.
| Document Type | Retention Period (years) |
| Bank Statements | 4 |
| Contracts | 6 |
| Employee Payroll Records | 6 |
| General Ledger | Permanent |
| Invoices | 4 |
| Financial Statements (Interim) | 4 |
| Payroll Journal | 4 |
| Patents, copyrights, trademarks | Permanent |
| Time Cards | 4 |
| Worthless Securities | 7 |
How Long You Should Keep Documents by Industry
Each industry has its regulations. Here we will focus on only three major industries: accounting, medical, and legal.
Accounting
The IRS has set retention periods on tax documents. In general, you should keep records that support an item of income, deduction, or credit on your tax return until the return’s period of limitations runs out. The period of limitations in most circumstances is three years and can be up to seven depending on certain circumstances. However, please consult a professional accountant before following any of the material given. Here are some other retention periods for accounting documents:
| Document Type | Retention Period (years) |
| Annual Financial Statements | Permanent |
| Budgets | 2 |
| Business Income Tax | 6 |
| Cancelled check (income taxes) | Permanent |
| Employee expense records | 7 |
| Filed Income Tax Returns | Permanent |
| Internal Reports | 4 |
| Payroll Tax Returns | 4 |
| Sales and Use Tax Returns | Permanent |
Medical
Every state has set retention requirements for medical records. All medical businesses should review the specific standards set by their state. However, here are the recommended retention periods from AHIMA:
| Document Type | Retention Period (years) |
| Disease Index | 10 |
| Master Patient/Person Index | Permanent |
| Operative Index | 10 |
| Physician Index | 10 |
| Patient health and medical records | 10 years after most recent visit |
| Patient health and medical records (minors) | Age of majority plus statute of limitations |
| Diagnostic Images | 5 |
| Diagnostic Images (minors) | 5 years after the age of majority |
| Register of births, deaths, or surgical procedures | Permanent |
Legal
Currently, federal guidelines are lacking for legal records. Therefore, the best course of action is to retain all legal correspondence. The retention period for court documents also changes by state. The time can vary between days to six months to ten years to fifty years. The American Bar Association has created the Modern Rule which sets standards for how a lawyer is to retain their client’s legal documents after a case is closed.
Many states have changed their record retention requirements since the creation of these rules. Depending on the state, lawyers are required to retain records for either six or seven years but some states are more flexible. Please consult with a lawyer in your state or do your own research to ensure your firm is following the proper record-keeping requirements before following any of the counsel given in this article.
Creating a Document Retention Schedule
Retention policy is an important aspect for many industries and businesses alike. A retention policy is just the first step to managing all your documents. Eventually, a document will reach the end of its life span and it will have to be disposed of properly. Guidelines have also been set as to how to handle these records.
In many cases, documents are of too high security to just be recycled or archived. Document shredding may be necessary to properly dispose of paper records. Furthermore, improper destruction of records could lead to fines and other penalties set by federal and state laws. Shred Nations can help you find a shredding contractor to handle all your document retention needs.
For permanent records, document scanning may be a good solution. Storing paper documents for several years is going to take up space. An effective and secure way to retain your documents while also saving space is to use an electronic document management system. We can also help you find a document scanning company that can convert all those paper documents to electronic records.
Let Shred Nations Help You Keep Up With Retention
If you would like more information about document retention, shredding, or scanning, please call Shred Nations at (800) 747-3365, fill out the form, or contact us directly using our live chat.
