It is our policy to keep bulk of our client tax return copies and work papers for seven years from the time they are generated. Upon the expiration of the 7-year period the documents are destroyed and become unavailable. Shorter retention period applies to incidental correspondences and other administrative materials that are not integral part of our client work papers.
The retention policy is based on consideration of common situations where our clients might need copies of their documents. The client needs are often dictated by events such as tax audits, insurance claims, litigations and other investigation by governmental authorities. Most of federal tax returns are subject to three-year statute of limitation for civil audits. However, in case of gross underreporting of income and criminal investigation, the six-year statute of limitation may apply. New York State labor laws often come with six-year statute of limitation. Various Securities and Exchange Commission (SEC) filings require seven-year document retention.
The client documents we retain are mostly copies of tax returns and other work-product along with list of transactions and other information that support our work. Upon completion of our work, we return original source documents provided by our clients when we deliver the product of our work. At this point, we are not obligated to keep providing additional copies of documents to clients.
In this regard, please be advised that, according to New York State Accountancy Regulation which also is consistent with AICPA guidelines and many other state accountancy laws, once a CPA returns to clients "copies of tax returns; or ii. copies of reports or other documents that were previously issued to or for such client; or iii. any accounting or other records belonging to or obtained for the client which the public accountant may have had occasion to remove from the client's premises or to receive for the client's account ... after the licensee has complied with the foregoing requirements by providing information to a client, it shall not constitute unprofessional conduct for an accountant to refuse to provide the same information to the client pursuant to a subsequent request by that client". |