Last month, President Joe Biden signed the PPP and Bank Fraud Enforcement Harmonization Act into law, which “establishes a 10-year statute of limitations for criminal charges and civil enforcement against a borrower who engages in fraud with respect to a Paycheck Protection Program loan.”
The bill closed a loophole for the fintech industry, which represented about three-quarters of PPP loans connected to fraud; financial technology companies previously faced only a five-year statute of limitations, while banks were liable for 10 years.
It’s a technicality, but it’s an important one. It’s also a good reminder to audit and organize your own financial records, whether for a business or as an individual. The U.S. Chamber of Commerce recommends different timelines for various types of documentation. Some, such as legal documents related to ownership and transfer of property, you should hang onto indefinitely. Others, like hiring records, may not be necessary to keep after 12 months.
The IRS itself suggests defaulting to three years for how long you should keep most tax returns. If you’re an employer, hang on to employment tax records “for at least four years after the date that the tax becomes due or is paid, whichever is later.” Check out Nolo for additional recommendations on business asset records, human resource files, tax records and more.
One way to help yourself now and going forward is to devise and implement a solid record retention policy. Certain documents may require different types of safekeeping and handling. Digital recordkeeping should also be integral to your process, as well as having policies regarding duplicate copies. And if you live in a disaster-prone state like Florida, consider also having physical backups, some of which may need to exist offsite or across state lines.
The National Federation of Independent Business offers a thorough starting guide for creating your own document retention policies. If you need further assistance or just a second set of eyes on your plans for recordkeeping, reach out to your accounting professional.