Some of the suggested retention periods are for legal reasons, while others are based on practical considerations. You may want to keep some records longer than the table suggests.
(1. It is an excellent idea for your organization to discuss and adopt a records retention policy. The table gives you some suggestion on items to be included in the policy and time periods to be used.
(2. When developing a record retention policy, it is important to think about where those files will be kept, how secure those files will be, and the conditions under which files will need to be stored (heat and dampness are destructive to files).
(3. Some of the reasons to keep files an drecords include legal requirements, potential relevance in future litigaation, and the needs of the organization, as well as historic importance. It goes without saying that should htere be threatened litigation or an investigation on a certain subject matter, particular care should be given that no file or document relating to that matter be destroyed.
(4. Tax returns and governmental reports affecting tax liability should be kept permanently. However, most backup records, such as receipts documenting income deductions need only be kept for seven years. The IRS calls for a six-year statute of limitations. The IRS has three years from teh date of when the income tax return is filed to question or audit it. If the IRS can prove an omission of at least 25% of income, the time period doubles to six years. Therefore, the seven-year period gives a one-year cushion beyond that time limit. While most churches are not required to file tax returns, these peeriods apply to any entity that must file, as well as individual filers.
(5. It is important to retain insurance policies and related documents. From time to time, lawsuits are brought which reach back many years. Therefore, it is important to determine the policy in effect at the time that a claim arose. Should those policies be missing, they can often be recreated by contacting your broker or insurance company to establish coverage.
General Council of Finance and Administration, The United Methodist Church