Need storage space!

[Denne]

I am trying to create enough space to file again! The boxes are getting to be a real pain...in the back ;~)

How long do you save your client's income tax return hard copies? How about the supporting documents?

How about Accounting records and Payroll records? I am also wondering about Bank Reconcilliations.

I am also wondering if you shredd the paperwork or if you have a service come in that shreds by the box?

Looking for ideas.............

Thanks for any assistance.....Denne

[Lynn EA USTCP in Louisiana]

Denne, until Hurricane Katrina came along we kept everything, forever. No more.

Now, per the IRS Circular 230, I keep only what's required - 3 years (actually I keep 4) for tax returns and supporting documents. I do review each file and pull out any docs pertaining to real estate purchases. stock and mutual fund purchses or basis, and corporate inceptions.

For accounting and payroll records, SSA mandates we keep PR records for 7 years, so 7 years it is.

My assistant labels each box with the contents, the date placed in storage and the planned destruction date.

We do not shred in house - too labor intensive for that. We have alternately used either a commercial document destruction company, and had them shred the boxes on-site. Another option was to have a weekend long bon-fire.

The commercial document destruction company is much faster. We paid about $200 - $300 for them to destroy a pallet's worth of boxes, piled 2 or 3 layers high.

Lynn Jacobs, EA, NP

Enrolled Agent

Notary Public

Kenner, LA

[TAXBILLY]

Where in Circular 230 does it say three years is required?

taxbilly

[mcb39]

I have kept everything forever, but am going to start cleaning house this week......shredding and then incinerating in outside wood burner. I have everything on backup disks anyway; so saving more than 3 or 4 years is crazy unless the client has a history of investment purchases and sales. Then I will continue to save forever because so many of these companies have changed names. (or dissolved)! I can no longer stand the clutter and file cabinets are running over both upstairs and down.

[Denne]

Thanks for your ideas..... I have records dating back to the early 90's and not an inch of room left to store anything. I even have documents for businesses that have sold or closed. Just need to get a start and trash as much as possible and shred or have shredded the rest. I think three years is more than enough to save for most people, but I do agree that we need to save....unless the client saves....all of the real estate and investment documents.

[Jack from Ohio]

Our copier has a scan function that will scan at about 60PPM. The copier scans to a .pdf file, then puts it on our server (We networked it when instlled.) We make a filename of client SS#+year. 3 5-drawer full deptht file cabinets are now permanently archived on the server. Setting resolution at 150dpi and using maximum compression, three file cabinets took up about 20GB of space.

A 1TB external drive can be purchased for less than $100, and provides secure permanent storage in the safe or safety deposit box. Two problems solved. With more and more State, School and local tax agencies investigating back to the Jurrasic period, this has been a lifesaver. The .pdf format is almost universally readable.

Of course we charge to "Open the archives and retrieve the data" when our clients request it. This is a task performed during the off season when work is very slow anyway.

[Randall]

I've been scanning the past few years all new files. Gradually scanning old files and shredding the paper as time permits. I'm a one person office so I do it myself as time permits. I am downsizing my office from two rooms to one and trying to go as paperless as possible.

[michaelmars]

becarefull of state requirements. in NY you are requried to keep returns for 7 years n some form or another. I keep for as long as i hve the clietn and for 7 years after i lost the client. things change. for example bernie madoff w/o allowd you to go back 5 years instead of 3 on a carryback. sure helped having the files handy and the returns still on my puter.

for most people i scan the oridinal docs and return them to the client so the paper files aren't too massive.

[Denne]

Thanks for the additional ideas. Lots to consider, probably why I still have so many files!

[Jake]

When we had our new office built a couple of years ago we purposely designed it with very little storage space and this forced us to implement a document retention policy. We scan or print to a PDF all documents (tax returns and supporting documents)as well as payroll information and we will keep these documents in an electronic format indefinetly. We use the Document Manger program that comes with ATX and a Ricoh 2550 Scanner/Printer. Keep an eye open for free shred "events" they are usually sponsered by banks or credit unions our local city goverment even sponsered one a few months ago.

good luck

[Don in Upstate NY]

Be careful of state requirements. in NY you are required to keep returns for 7 years in some form or another.

I thought it was the same as the federal ...

Tax Law § 685, (g) (4) Copy or list to be retained by tax return preparer. Any person who

is a tax return preparer with respect to any return or claim for refund

shall for a three year retention period described in paragraph nine of

this subsection:

(A) retain a completed copy of such return or claim for refund, or

retain, on a list, the name and identification number of the taxpayer

for whom such return or claim was prepared, and

( make such copy or list available for inspection upon request by

the commissioner.

[from http://public.leginfo.state.ny.us]

Is there a more restrictive limit lurking around somewhere?

[michaelmars]

I thought it was the same as the federal ...

Tax Law § 685, (g) (4) Copy or list to be retained by tax return preparer. Any person who

is a tax return preparer with respect to any return or claim for refund

shall for a three year retention period described in paragraph nine of

this subsection:

(A) retain a completed copy of such return or claim for refund, or

retain, on a list, the name and identification number of the taxpayer

for whom such return or claim was prepared, and

( make such copy or list available for inspection upon request by

the commissioner.

[from http://public.leginfo.state.ny.us]

Is there a more restrictive limit lurking around somewhere?

THIS IS FROM THE NYS DEPT OF EDUCATION-regulations of cpa's. the issue of course is if tax prep falls into this catagory, but why take the chance. every cpa i know is just keeping everything for at least 7 years.

iv.Retention of work papers.

a.Licensees shall ensure that a formal written policy is established for the retention of work papers that is in accordance with the requirements of this subparagraph. Licensees employed by an employer authorized to practice public accountancy shall have met this requirement for a formal written policy, for work papers produced under such employment, if their employer has established a formal written policy for the retention of work papers that is in accordance with the requirements of this subparagraph. Such written policy shall identify the process and authorization requirements for the destruction of work papers after the expiration of the retention period.

b.Licensees shall ensure that work papers are retained for a minimum of seven years after the date of issuance of the work product, unless licensees are required by law to retain such records for a longer period. Work papers may be retained for a period that is longer than seven years from the date of the issuance of the work product and may be retained permanently.

c.Licensees shall ensure that work papers are retained during the term of a New York State Education Department investigation or disciplinary proceeding by the New York State Education Department that is reasonably related to such work papers. Licensees shall not dispose of such work papers until notified in writing by the New York State Education Department of the closure of the investigation or until final disposition of the disciplinary proceeding.

d.If work papers are retained in an electronic form, the licensee shall ensure that such work papers are capable of being accessed, for read-only purposes, throughout the required retention period established for the work papers and are safeguarded through sound computer security procedures to prevent the unauthorized modification of the work papers.

e.Work papers shall not be destroyed or otherwise disposed of at a time or in a manner that is inconsistent with applicable requirements of the law.

v.Availability of work papers to the department. A licensee shall make available to the New York State Education Department at its request work papers that the department determines to be relevant to an inquiry or complaint about a licensee's unprofessional conduct, in accordance with the requirements of section 29.1((13) of this Part.

[Kea]

I, too, have been keeping all info indefinitely. This came in handy when I had an NOL this year that I carried back 5 years.

That said, my fire-proof safe / file cabinet is now full. My husband (now co-owner of the tax business) is currently scanning all my old files on to a back-up disk. Once I go over all the files (oh joy), we'll start shredding the old stuff. I'm not sure I'm really ready to go completely paperless. I'm still more comfortable using the paper from the previous year and current year while I'm working on the return. So I may keep 2 years of paper. I'll see how it goes next season and re-evaluate.

The timing of scanning in all old documents is working well. We're hoping to spend a lot more time traveling now that he's retired from his W-2 job. And there was no way I could put that fire-proof safe in our 5th wheel. Now I can have client history wherever I go!

[TaxCPANY]

I've been following Camico's (or some practice-liability insurer's) advice: to NOT shred a client's documents without first having contacted the client -- via Certified Mail/Return Receipt Requested (or, now, emailed-receipt confirmation -- costs $1 less) with a *deadlined* offer to send the documents back to the client -- on its dime -- else the docs get shredded promptly upon the eclipse of the deadline.

In the four years since I've "gone paperless," this policy has allowed me to jettison two, letter-size AND two legal-size, file-cabinets -- and package a couple, cubic feet of documents for only two clients, while over a dozen blew my 'formal' notice off.

In this next, 'slow' month, I expect to rid myself of another, four-drawer file-cabinet, this way -- and 'lose' only a day of my assistant's time to shredding formally-abandoned documents.

Pragmatically yours, TaxCPANY

[Catherine]

I've been following Camico's (or some practice-liability insurer's) advice: to NOT shred a client's documents without first having contacted the client....

<snip>

This advice would not apply to ancient completed returns but just to other client documents? Such as? I keep NO original docs, but I do have notes, a few organizers (mainly blank, which is why I pretty much don't use them), and sometimes faxes of originals. So I don't see why I should contact a client before shredding -my- copy of tax returns in the client's possession (especially when I still have pdf's of all of them).