A written record retention policy, schedule and destruction log for a CPA or tax firm

This page is general information, not legal advice. State board rules and contracts vary. Confirm the policy with counsel or the state board in every state where you are licensed. The IRS how long page, Circular 230, Publication 1345, Form 8879, and Publication 4557 are the texts to read. This page does not invent a retention period or a destruction method that those texts do not state.

Without a written owner, a schedule, and a destruction log, people keep boxes "just in case" or delete a folder because the drawer is full. The IRS how long page is written for taxpayers keeping their own records. A CPA firm also holds client records, preparer copies, and signature forms. Those are different rows, and they need a source column, not a year count from memory. (How long should I keep records?)

Write these sections into the policy, then fill the schedule:

• Scope: which clients, which entities, paper and electronic, including portals and backups
• Owner: one named person who can approve destruction
• Schedule: one row per record type, with a source URL, not a remembered year count
• Legal hold: nothing is destroyed while a dispute, exam, or claim is open
• Destruction method: how you destroy paper and how you delete electronic copies, tied to the WISP
• Review date: a calendar date each year, before filing season

Put a pointer to this policy in the tax preparation engagement letter so clients know you keep a copy and that their own records are still theirs. Offboarding steps are the CPA firm client offboarding checklist.

Circular 230 section 10.28 is return of client's records. The Office of Professional Responsibility page is the hub for Circular 230. Read the section. Do not treat a blog paraphrase as the rule. (Circular 230 PDF, Office of Professional Responsibility and Circular 230)

In general, a practitioner must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations. The practitioner may retain copies of the records returned to a client. The existence of a dispute over fees generally does not relieve the practitioner of his or her responsibility under this section. Nevertheless, if applicable state law allows or permits the retention of a client's records by a practitioner in the case of a dispute over fees for services rendered, the practitioner need only return those records that must be attached to the taxpayer's return. The practitioner, however, must provide the client with reasonable access to review and copy any additional records of the client retained by the practitioner under state law that are necessary for the client to comply with his or her Federal tax obligations.

Section 10.28(b) defines records of the client. It includes documents the client or a third party provided, and it includes certain returns and papers the practitioner prepared that the taxpayer needs for current Federal tax obligations. It also states what the term does not include when fees for that document are unpaid. Read the subsection. Check your state board before you withhold anything. The letter and the handoff live on CPA disengagement letter and client records. This page only records that the policy must cite section 10.28 rather than invent a withholding rule.

The ERO keeps the completed Form 8879 as the current Form 8879 PDF and Publication 1345 state. Do not type a year count from memory. Put those two URLs in the source column of the schedule. (Form 8879 PDF, Publication 1345)

Client side periods belong on the IRS how long page, including the rows for ordinary returns, claims for credit or refund, worthless securities or bad debts, substantial unreported income, no return, fraudulent returns, employment tax records, and records connected to property. The same page says to keep copies of filed tax returns, and that records you no longer need for tax may still be needed by an insurer or a creditor. Link the page on every schedule row that uses it. Do not copy year counts into the policy from memory. (How long should I keep records?)

What a bookkeeping client should keep on their side is the small business recordkeeping checklist. How long the firm keeps the preparer copy is this policy, not that checklist.

A legal hold pauses destruction. If a client, an examiner, a state board, an insurer, or counsel has an open matter, the owner marks hold on every related row. No one destroys that file until the owner clears the hold in writing.

Secure destruction is a WISP and Publication 4557 question: printed taxpayer data and electronic copies both have to go in a way that matches the safeguarding plan. Do not put returns in a lobby recycling bin. Do not delete the only electronic copy until the paperless retrieval test still passes for what you are required to keep. (Publication 4557, WISP for tax preparers, how to go paperless at a tax firm)

Review the policy on a calendar date each year, before you send organizers. Check that source URLs still open, that the owner is still at the firm, and that the destruction log has no rows missing a source. Check your own state board. This page does not list states.

Paste these headings into the firm document, then attach the CSV as the schedule and the log.

The CSV has a source column that points at the IRS page for each line, plus a destruction log with file or box ID, record type, source URL, legal hold, method, who destroyed it, date, and a witness.

Download the retention schedule and destruction log. The tax season operator can draft a chase when a signed Form 8879 or a client source file is still missing from the folder you are required to keep. Your staff approve what goes out. Your CPA reviews and signs every return.