Discussion:How long to keep records

Any advice would be greatly appreciated. Thank you.

Dar

Thank you Dar

Come up with a naming convention that is suitable for the work you do and it should be easy to locate what you are looking for as well.

Cheap scanning software is readily available nowadays or you can go with stuff like paperport as well. It scans it all to PDF's which are fairly universal to begin with.

The good of it is it gives you back your living space with no need for all the files and what not.

I guess old habits die hard...at least for me but I'm working on it.

You are so right about the fraud issue but I never worry about that b/c my motto is "Take every deduction to the max....if the IRS says take it, I do but I won't go to jail for anyone". My clients get a kick out it when I say it & they know I mean it. I also don't leave anything under the table just in case they get audited. I don't worry about the audits b/c I know I did the returns properly. In the last 16 yrs I can count the number of audits I have had on both hands.

Thanks JR Dar

Dar

I've got a couple of people that dropped off their bookkeeping and then disappeared. Fortunately I didn't do any work until I had a retainer (which of course I never got). One is paperwork from 1995. I've heard that the man is in jail and not supposed to get out for at least another five years (fraud, stealing from the elderly). The other is a woman that is hiding from bill collectors. I have her paperwork from the mid-90's also. Of course I'm not going to do any work for them but am trying to figure out when I can comfortably throw their paperwork away. Guess I'll do it when I run into a space issue. (Would rather avoid the war when they eventually resurface and want their paperwork.)

Rule #2: Keep the client out of jail so that they can send me more money.

In either case, does it state that the accounting professional is to maintain the records, or that the taxpayer is to maintain the records? I would be billing the client extra if I were maintaining his records. I only maintain records for my purposes (thus the 3 years since tax return has been filed rule).

My advice is to seriously look into a scanning or Document management system. It can be a little expensive to setup and a little cumbersome at first to get used to. But after the initial stages it is a wonderful system. As Kevin eluded to it is not our responsibility to keep the doc's past the SOL, however I feel that because I can now reproduce any doc for any client in a matter of minutes I have a certain marketable value that another preparer does not. What I mean is it is another way for me to differentiate myself from the competition. Some clients just like to know that you have there back so to speak.

I also hired a high school gal this spring to scan old files for me. I haven't yet gotten rid of the old files but am working on it slowly.

Can anyone speak to the value Intuit's Document Management System and what it might add (at a cost of about $400/year, I think) over what Paperport does?

I see the best benefit in that you can actually print a DMS copy along with the client and govt copies. In other words you simply set the Dms as a printer in your master options and then hit print and presto the DMS copy appears in DMS. Also when you have to reprint it does not delete the original it does provide a date stamp so that you can view the specific one you want. I believe you can set the options to print over any existing file though. Also a great benefit is when I write client letters or IRS responses I can scan them into the DMS client folder.

However, for a smaller practice's needs you are able to just manually save the pdf to the client's directory (name it accordingly) include the copy of the tax return (name it accordingly), any other correspondence with the client as well, and then you should have everything in one neat place for the client.

If you use something like goldmine to record contacts between yourself and your client then you should have everything you could possibly need for a client in the clients own directory.

My naming convention for clients goes something along the lines of C:/clients/doe, john/2007/personal/Doe, John IRS Correspondence 07-03-07.pdf

It makes it simple to see any correspondence that you have sent out with clients and any information associated with their returns in one place. After the year is up you create a new folder for all 2008 information. It really does save a ton of time once you get the hang of it.

Excuse me, but that applies to the t/p, not a tax return preparer under IRS rules. It is true that a client may have possession of source documents and crude books of original entry, but our worksheets and notes-to-self constitute the Rosetta Stone to result in a correct returns as best we effect and usually do, it is a fool as a client to underreport income or my heavens, commit fraud in old otherwise barred years, and expect we can bail them out with our records. They just lack simple street wisdom as to how easily IRS/DOJ can turn us cooperating witness, though 99% of former and even current clients are typically clueless in this regard.

This is certainly not to demean (for mere business reasons) a trusting relationship with a good, current client, but I would worry less about old document storage to merely minimize my time. There may come the day when IRS wants a real old document from many years ago re a current transaction, and we gots the only copy from an out-of-business vendor on the face of god's green earth. Word-of-mouth don't get no better than when that IRS inquiry amounts to nothing. And, yes, we might over-hype what we did to make it a simple IRS matter but fair play. Client, tell your friends.

I hate it when clients drops me original docs which may have IRS import long into future (else I return the lot), and I just make photocopies and arrange permanent files so that what I may need off-chance in future re IRS will be on file with a bit of search by tax year. Nor would I spend the time or pay a worker to scan routine stuff for later electronic retrieval. I just don't see the cost advantage.

Some documents I keep three years, others seven, plus I have a "Permanent File" for active clients, which I destroy according to my policy if the client becomes inactive (i.e. fires me).

My position with my clients is that I don't have anything in my office that they don't also have - I give everything back to them, including a printout of their general ledger and calculation worksheets, so that if I fall off the face of the earth, they aren't left high & dry.

I'm told by legal experts that it can be doing our clients a disservice to keep copies of their documents longer than is legally required, plus if things get really ugly and a document is requested that I have destroyed, I can point to my policy to protect myself.

My storage room in my basement is getting cleaner and cleaner each year, and hubby is very happy because of the increase in space he has for his tools, golf clubs, etc - when hubby's happy, I'm happy.

After all of this, I do get a little torqued when a client calls up & says "How long should I keep stuff? I just need a quick answer"!