1.
IRS Circular 230 Disclosure: To ensure compliance with the requirements imposed by the IRS, we inform you that any tax advice contained in this communication,
including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding penalties
under the Internal Revenue Code or (2) promoting, marketing or recommending to any other person any transaction or matter addressed herein.
Lisa Chapman, Esq.
The Royse Law Firm, PC
lchapman@rroyselaw.com
April 23, 2014
THE PAPER ARMAGEDDON:
A PRACTICAL GUIDE FOR CREATING A DOCUMENT RETENTION
POLICY FOR YOUR COMPANY

2.
THE ARMAGEDDON EFFECT
• Significant changes over the past 25 years
– Increased reliance on “paperless” office
• Benefits include efficiency and ease of use
• Impact of social media
• Environmental effects

3.
WHAT IS A DOCUMENT RETENTION PLAN?
Two issues:
1. Should you retain company documents?
2. In what form and for how long should you
retain company documents?

4.
WHAT SHOULD INFORM THESE DECISIONS?
• Legal obligations
– Federal and State statutes and administrative
rulings
• Industry and cultural standards
• Potential risk of litigation and legal compliance
requirements
• Comfort zone - the extent to which a company
is comfortable relying on digital resources to
preserve documents

5.
LEGAL OBLIGATIONS: TAXING AUTHORITIES
• Business income tax returns
– All supporting documents
– Full corroboration will be required for an audit
• Employment tax records
– E.g., employer identification number, amounts
and dates of wages, annuity or pension payments,
tax payments, personal identification information
about employees, tip allocations, inclusive dates
of employment, and job titles

6.
LEGAL OBLIGATIONS: TAXING AUTHORITIES
• Business asset records
– Proof of ownership and/or sale
– Required to show amortization, depreciation,
gains, losses, or deductions
– Keep original copies of deeds and proof of
payment
• Business ledgers and other important
documents
– E.g., journal entries, P & L statements, and
financial statements

7.
LEGAL OBLIGATIONS: TAXING AUTHORITIES
• Legal documents
– E.g., bylaws, board of directors minutes, annual
meeting minutes, and business formation
documents
• Bank account records
• Credit card records
• Human resources files

8.
LEGAL OBLIGATIONS: TAXING AUTHORITIES
Duration of retention required by tax authorities:
• Depends on the period of limitations during which you
may seek a refund or the taxing authority may conduct
an audit
– You need these documents if you want to amend your
return or if a taxing authority elects to audit your returns
• Business income records
– Generally three years if you owe additional taxes unless:
• You don’t report income and the underreporting is equal to or
greater than 25% of your gross income as shown on your tax returns
= 6 years
• If you don’t file a return or file a fraudulent return = no limit
• If you intend to claim a credit or refund = 3 years after taxes paid
• If you intend to file a claim for loss of a worthless security = 7 years

9.
LEGAL OBLIGATIONS: TAXING AUTHORITIES
Duration of retention:
• Employment records
– Four years after date taxes were paid or due, whichever is later
• Business asset records
– The clock begins to run from the date of sale
• Legal documents
– No limit
• Bank account and credit card records
– 7 years
• Human resources files
– Applicants – 3 years
– Employees – 7 years from the date of termination or 10 years
after worker’s compensation benefits were paid
– If it is litigation – 5 years from the date of conclusion

10.
INDUSTRY AND CULTURAL STANDARDS
• Significant variance
– degree to which regulated
• Comparison with other cultures

11.
POTENTIAL RISK OF LITIGATION
• Balance of two considerations
– (1) you need to save documents in order to mount
a defense/pursue a claim, however
– (2) you don’t want too many documents retained
as it will be very costly to defend a lawsuit
• Federal and state laws concerning document
retention:
– “Litigation Hold”
– Production of digital records

12.
IN WHAT FORM SHOULD YOU PRESERVE
DOCUMENTS?
Certain documents MUST be preserved in paper form:
• Wills, codicils, and testamentary trusts
• Documents relating to adoption, divorce, and other
family law matters
• Court orders, notices, and other court documents
• Notices of cancellation or termination of utility services
• Notices of default, repossession, foreclosure, or
eviction
• Product recall notices affecting health and safety
• Documents relating to the transportation of hazardous
materials

13.
IN WHAT FORM SHOULD YOU PRESERVE
DOCUMENTS?
• Your comfort zone – the extent to which you
want to rely on digital resources to preserve
documents
– Technology meltdown
– Hacking
– Your workforce population
– Your service provider’s requirements

14.
FOR HOW LONG SHOULD YOU PRESERVE
DOCUMENTS?
• Consider litigation issues
– Best evidence rules/compliance with statutes
• Legal requirements

15.
DOCUMENTS MAY BE PRESERVED IN
ELECTRONIC FORM
• Wire transfers and electronic checks
• Bank deposit images
• Tax returns
• Tax receipts
• Contracts
• Warranties
• License agreement
• SEC reports
• Auto insurance
• Business operation documents: marketing materials, collateral
• Emails/texts/tweets
• Video and photographs
• Voicemails
• Trademark registrations
• Employee handbooks

16.
OTHER “ELECTRONIC VS PAPER” ISSUES
• Electronic signatures
– Legal validity
• Some documents must be notarized/recorded
by county recorder
– Grant deeds, deeds of trust, mortgages, and
leases
• Personal documents to save in hardcopy
– Passports, drivers license, identification, work
place rules, business licenses, and health permits

17.
PERSONAL RECORDS
Categorized by type:
• Income
– Form W2, Form 1099, bank statements, brokerage
statements
• Expenses
– sales slips, invoices, receipts, cancelled checks, or proof of
payment
• Home
– closing statements, purchase and sales invoices, proof of
payment, insurance records, Form 2119 (if you sold home
before 1998)
• Investments
– brokerage statements, mutual fund statements, Form(s)
1099, Form 2439

18.
PERSONAL RECORDS
How Long Should You Save These Documents?
• Generally three years if you owe additional taxes
unless:
– You don’t report income and the underreporting is
equal to or greater than 25% of your gross income as
shown on your tax returns = 6 years
– If you don’t file a return or file a fraudulent return =
no limit
– If you intend to claim a credit or refund = 3 years
after taxes paid
– If you intend to file a claim for loss of a worthless
security = 7 years

19.
PERSONAL RECORDS
Mechanics of document retention plan:
• Plan type
• Compliance with the plan

20.
Lisa Chapman has represented startup and mid-sized companies for over twenty years in the
areas of employment counseling, employment litigation, commercial litigation and trade secret
litigation. In her counseling practice Lisa uses her substantial experience as a trial attorney to
counsel companies on employment compliance issues, including wage and hour laws,
employment policies, hiring policies, sexual harassment training, leave of absence, and other
employment related issues. She regularly counsels companies involved in mergers and
acquisitions about due diligence issues relating to employment law.
Lisa has litigated a wide variety of commercial and employment related matters in federal and
state courts and before the Equal Employment Opportunity Commission, the U.S. Department of
Labor, and the California Department of Labor. Among others, she has litigated cases involving
sexual harassment, discrimination, and class action wage and hour claims. Lisa puts a priority
on achieving successful settlements and resolutions for her clients in a timely and cost effective
manner.
Telephone: (650) 813 9700 ext. 221
Email: lchapman@rroyselaw.com
BIO

21.
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