We live in a digital age and less paper is a good idea and saves trees, right?? This is true, however I recommend to our clients that deduct expenses not go paperless. You need those papers to substantiate your deductions. And the IRS can audit or ask for proof for up to 3 years back and unlimited years in the case of fraud!
I just had a client call me this week who needs to send the government bank statements to prove some expenses. Since this client is paperless they don’t have these documents. Your bank for example only keeps a few months or a year worth of documents. In order for this client to retrieve the bank statements they would have to pay a per statement retrieval fee which can be very costly! Going paperless doesn’t mean not keeping records.
So if you want to save some trees and choose to opt in for paperless mailings here is some advice. Be sure to make a digital copy of the receipt or statement. Keep a digital filing cabinet on your computer and be sure to back up everything regularly. Make your file names in a way that makes your documents easy to find. My best advice is make your digital file cabinet like you would a paper file cabinet. The good part of the digital files is they are searchable.
People always ask how long to keep the documents, we recommend you keep them for 7 years.
Do you have digital files? Any great advice for us? Be sure to post below. Also feel free to share this blog with your friends, Facebook etc with the quick links below. Thanks!