Magazine article Information Management

The Law and Records-Rarely the Twain Shall Meet

Magazine article Information Management

The Law and Records-Rarely the Twain Shall Meet

Article excerpt

The relationship between law and records retention ought to be straightforward: The government requires you to make and save records, so you make and save them. If all goes right, the records made and saved are exactly what was expected. Unfortunately, the ideal situation is often not what we see in the real world.

Sometimes the ideal situation described above is exactly what happens. For example, the Mine Safety and Health Administration (MSHA) Form 5000-23 that employers fill out to document mine-related safety training states:

Upon a miner's completion of each MSHA approved training program, the operator shall record and certify on MSHA form 5000-23 that the miner has received the specified training. A copy of the training certificate shall be given to the miner at the completion of the training. The training certificates for each miner shall be available at the mine site for inspection by MSHA and for examination by the miners, the miner's representative, and State inspection agencies. When a miner leaves the operator's employ, the miner shall be entitled to a copy of his training certificates.1

There is no ambiguity at all in the requirements associated with this document: Employers who operate in the mining industry must train miners, complete this form, and maintain it for two years as specified in the law's other sections.

Form 500-23 completely satisfies the information retention requirement for the training in question. If you have properly completed current 500-23s for all miners, there is no question at all whether you ought to be retaining something else to document that the training occurred. There is a one-to-one correspondence between the law and the record, which satisfies it. If you have met the requirement, your employees may sue you or the economy may collapse, but in this one thing, you may be confident of having overcome all hurdles - you are safe.

Problem 1 Ambiguous Laws

Other times, however, things are not so simple. Consider:

(a) In general. Except as provided in paragraph (b) of this section, any person subject to tax under subtitle A of the Code (including a qualified State individual income tax which is treated pursuant to section 6361(a) as if it were imposed by chapter 1 of subtitle A), or any person required to file a return of information with respect to income, shall keep such permanent books of account or records, including inventories, as are sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown by such person in any return of such tax or information. (b) Farmers and wage-earners. Individuals deriving gross income from the business of farming, and individuals whose gross income includes salaries, wages, or similar compensation for personal services rendered, are required with respect to such income to keep such records as will enable the district director to determine the correct amount of income subject to the tax. It is not necessary, however, that with respect to such income individuals keep the books of account or records required by paragraph (a) of this section. For rules with respect to the records to be kept in substantiation of traveling and other business expenses of employees, see Sec. 1.162-17.2

This requirement is very different from the first example. There is neither a prescribed form or format for the records nor precise detail on what is needed. Apparently, so long as it is "sufficient to establish the amount of gross income," anything will do - or will it?

When the time comes to consolidate records and keep only what is necessary for tax compliance, taxpayers faced with requirements of this sort, of which there are many, are often reluctant to purge anything. The concern is that the Internal Revenue Service (IRS) may determine that what remains is insufficient. The lack of a hard and fast rule creates uncertainty rather than flexibility, which in turn fosters a keep-it-just-in-case mentality. …

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