No one wants a missing document to cost them money, but being buried under a sea of paper is no pleasure cruise either.

This week The Meyers Report is doing a brush up on just which records and files consumers and business people should save - and for how long - because we know that adequate recordkeeping protects consumers and business people against themselves, future tax audits, law suits and other unforeseen paperwork headaches.Plagued by bursting file cabinets, we asked accounting experts what papers we could safely store in the circular file. Here is what we found:

Retaining records is important for individuals and even more so for the small businesses and large corporations.

While a business is always open to audit by the Internal Revenue Service, individual filers can throw away most records three years after the filing date.

"You should always keep your returns, but you can get rid of your supporting materials after three years, because the federal government can't come back and challenge your tax returns," said Randy Abeles, a tax manager with the Chicago office of Laventhol & Horwath, a large accounting firm.

Abeles said the government left itself two loopholes in this regulation - both designed to nail tax cheaters. One involves understatement of income; the other concerns tax fraud.

"If an individual is suspected of declaring less income than he earned, the IRS can challenge his return at any time within six years of the due date," said Abeles.

By IRS definition, a 25 percent or greater understatement of income is considered a serious offense, subject to hefty penalties.

"If the government suspects you of tax fraud, all of your tax returns are open to examination," said Abeles.

However, businesses are more susceptible to IRS scrutiny. It seems as though every piece of paper that comes into the office has to be filed, just in case Uncle Sam comes knocking at the door.

"The IRS isn't the only issue," said Abeles. "You need records for business and legal purposes. And if you're going to sell the business, you need records for prospective buyers."

Still, some documents can be relegated to the circular file. Here is a list of documents and the recommended length of time each should be kept by businesses and individuals:

- Correspondence. General correspondence can be disposed of after two years. Correspondence that deals with licensing, business traffic and purchases should be kept five years.

Production correspondence should stay on file seven years. Any correspondences on legal or tax-related issues are PERMANENT records.

- Purchasing and sales documents. These should be kept three years.

- Receiving and shipping records. Keep them four years.

- Property and equipment records. Purchase, sales and depreciation records should be permanent.

- Personnel records. Keep them five years.

- Insurance documents. Keep expired policies four years. Accident reports and fire inspection reports should be saved for five years.

Keep business safety reports and group disability rec-ords for seven years. All records of settled claims should be permanently retained.

- Accounting records. Keep trial monthly balances for three years. Bank statements and deposit slips can be thrown in the trash when more than four years old. You should expect to be hit with a service charge if you ever want copies of your statements.

Retain payroll records four years. Expense reports and subsidiary ledgers should be saved for five years.

Keep checks, payroll time reports, earnings records and voucher payment records for seven years. But audit reports, financial statements and general ledgers and journals are permanent accounting records.

- Corporate records. Save expired mortgages, notes and leases for seven years. Deeds and easements, labor contracts and other business agreements should become part of your permanent records. Bylaws, the corporate charter and minute books also should be among the permanent records.

- Other permanent records. Keep all tax returns and supporting documents as well as capital stock and bond records, patents, copyright and trademark registrations, retirement and pension records.

Reader questions will be answered and may appear in this column, when mailed to Gary S. Meyers at 20 West Hubbard St., Chicago, IL 60610.