Scanning documents

[oceanlovin'ea]

Ok, I am trying to turn over a new leaf this year. I purchased a Fujitsu ScanSnap S1500. I am scanning w-2's, 1099-R, social security statements, etc. I am scanning the 8879 after it has been signed. I am scanning the documents that we are told to keep a copy of if they have EITC. Then I give their original documents back to them.

Then I am backing this all up on my little hard drive along with my tax returns. This is all in an effort to become more paperless.

Am I safe in what I am doing? Have I done all the scanning, saving and backing up that is necessary?

I don't want to get halfway through tax season and realize that I need stuff I have given back to them.

Linda, EA

[Lion]

Scan everything they give you (well not the informational pages, blank pages, etc.!). Then you'll have it all if you need it. For example, the list of business income from a sole proprietor. It won't take up much space.

[smithtax]

You might also consider an encrypted document storage program.

And an external hard drive to use as your backup drive.

[Koss]

Scanning

Are there certain documents that you are not scanning?

I'm not sure I understand the original question.

A scanned image is just as good as a photocopy, as long as it is clear and legible. IRS regulations allow imaging of any document you are required to keep, including Form 8879. You are not required to keep a paper copy of anything.

You may want to consider encryption, if you are not already using it.

There is a long-running debate about this, that will not be resolved any time soon.

Whether you work from home, or from a professional office, with or without an alarm system, or commercial-grade locks and other physical security, you cannot completely eliminate the risk of data theft. And if you are the victim of a burglary, a thief is more likely to grab a computer, or even an external hard drive, along with other small things he can carry, as opposed to trying to steal paper files from a row of locked filing cabinets, or trying to carry off the filing cabinets themselves.

My personal opinion, therefore, is...

If you are not encrypting your client data, the risk associated with data theft appears to be greater than it was back in 1974, when everything, including the tax returns, was in paper format. I am not attempting to measure the risk of a theft actually occurring. My point is that when a theft does occur, in today's environment, the thief is more likely to get a large amount of sensitive data, in a small, easy to carry package, than he would have 30 years ago.

One final observation that I have made in other posts:

If your PC or your backup drive is stolen, and it is not encrypted, the probability that your clients will become victims of identity theft is probably very low. But you will deemed negligent unless you inform your clients of the theft. The loss of confidence by your clients, and damage to your professional reputation, could be severe, even if the stolen drive actually ends up in a landfill somewhere, and nothing ever happens to any of your clients.

BMK

[taxmandan]

One final observation that I have made in other posts:

If your PC or your backup drive is stolen, and it is not encrypted, the probability that your clients will become victims of identity theft is probably very low. But you will deemed negligent unless you inform your clients of the theft. The loss of confidence by your clients, and damage to your professional reputation, could be severe, even if the stolen drive actually ends up in a landfill somewhere, and nothing ever happens to any of your clients.

BMK

And, in some states you have to notify everyone affected and pay for one year of credit monitoring for any client who asks for it. At $29.95 for 300+ clients.....ouch. And that is whether or not it is encrypted, just stolen.

[oceanlovin'ea]

I do have an external hard drive that I am backing everything up on.

I guess I need to do more research on encryption. I know what it is but not sure how I get my documents encrypted. Probably a program that does that. As soon as I have time I will check that out.

But you all answered my question about what I was scanning. Thanks.

Linda, EA

[Roberts]

I don't encrypt my files generally if I'm just storing them on my hard drive. The computer is password protected and access to the software programs is password protected but that's not considered enough but actual encryption of the files would be a nightmare. Notes to realize:

primopdf is a free software program and you can password encrypt any pdf file you generate. When I'm generating a .pdf file to email to a client, I always generate it using the program. How it works, when you print a tax return, just hit PrimoPDF as the printer and it produces the .pdf. Clients usually hate to have to keep track of passwords (I don't keep it but I'll send them another copy) but I'm not sending out an unencrypted file like that.

Secondly, once its on the hard drive, I recommend you back it up in case the hard drive dies. SpiderOak offers a FREE 2 GB encrypted backup of your files. You download the software and pick the folders you want to backup. Spideroak is not able to access the files unless you give them your password. Also, if you lose the password, it's gone. Start a new account because there is no way for SpiderOak to retrieve it. I've done this before, not a big deal.

[taxxcpa]

I keep it simple. I use the client's SSN as the password. If they can't remember that, then there isn't much I can do to make it any easier.

[ChEAr$]

I think Drake encrypts all files as a matter of course. So my backups on that Cruzer K drive does the trick.

This is my first year going paperless, at least for most backup documents like 8879 and w2 and 1099's. It's not too time consuming, and after four years from now, I'll only need half a file cabinet drawer for clients.

The thumb drive I keep handy to grab in case of fire or disorder. (hmm, sounds like a general order for guard duty. well, it IS, now that I remember it. _

[ToddFogelberg]

Fujitsu S1500 is a good choice

Linda - I've been paperless for years and this is a good choice for scanners. It comes with a free standard version of Adobe which gives you the ability to password protect your files. Use the profile manager to set profies so it prompts you for a password - you can hit cancel if you don't need a password on a particular document.

I retain 2 basic files for each client's tax year - Smith1234-2012 Tax Return is the full copy of the return and all worksheets. ( I want a copy of the full return independent of my tax software). The 2nd file is a scan of their signature documents and W2s etc. Smith1234-s.

I recommend password protecting every client file. (I use the client's SSN as an earlier poster mentioned).

The Fujitsu ScanSnap S1500 is available from Newegg for around $400 and as I mentioned comes with Adobe, a great value.

The Profile Manager is a bit tricky to set up - the goal is to get it to generate pdf files, prompt you for a password when you need one, and save the file to the appropriate folder.

I of course backup (weekly) and am going to look into spideroak as suggested earlier.

I think we are more secure with NO paper in the office with regard to client confidentiality.

You can get software (I don't have it yet) that encrypts your entire harddrive. The only way to boot up the drive is to enter a password. This is on my list of things to do - one brand is "PGP".

Good luck.

[Traveling EA]

Backups

Along with the scanning several have mentioned various types of backups. Does anyone use online backup programs such as carbonite?

Don

[geekgirldany]

In regards to scanning, Form 8879, can I scan in it and the W-2s and then shred the originals? Well I will keep the W-2 but the way I have been doing it is I staple the 8879 & W-2s together and then when I get the ack I staple it to them. Would really cut down on my paper work if I can just scan it in.

[Koss]

Scanning

GeekGirlDany wrote:

In regards to scanning, Form 8879, can I scan in it and the W-2s and then shred the originals? Well I will keep the W-2 but the way I have been doing it is I staple the 8879 & W-2s together and then when I get the ack I staple it to them. Would really cut down on my paper work if I can just scan it in.

The IRS will accept a scanned image of any document as valid recordkeeping, as long as the image is clear and legible. This includes Forms W-2 and Form 8879. So I'm not sure I understand your question.

It feels like your question has something to do with the acknowledgement, or what is often referred to as the DCN, or Declaration Control Number.

When I worked at a storefront chain, the established procedure was to write the DCN into the Form 8879. The DCN may not be available for 24 hours or more after you transmit the return. So it sounds like you may be asking if you can scan Form 8879 before you get a DCN, and then shred the original (or give it to the client). In this manner, you would not be able to write in the DCN later.

I don't think that's a problem. I don't think we are required to enter the DCN on Form 8879. I think it is sufficient if you keep a separate record of all the DCNs, with the corresponding social security numbers. But if it makes you feel better, you could always scan or screenshot the acknowledgement for each return, and store that image in the same folder with Form 8879 for that particular return.

If you are not keeping the original Form 8879, the form must be signed by the taxpayer, and the spouse if MFJ, and the preparer, before you scan it. That can be a pain if you have multiple preparers in the office, and the client comes in to pick up the return when that preparer isn't working. Now you do have to keep the original until that preparer signs it.

But I don't think the DCN is required on Form 8879. We are also not required to use Form 9325. You can use any form you want, including your own form, or an e-mail message. We're not even required to give the client any kind of confirmation, unless the client asks for it. It works the other way around. We have an obligation to make reasonable efforts to reach the client if the return is rejected. Confirmation of an accepted return is an optional thing. We are required to give the client the DCN if they ask for it.

BMK

[geekgirldany]

Thanks Burton. I've always stapled the signed 8879 and W-2s together and put them in a folder waiting for acks. After acks are received, I print them out and staple to the 8879. I suppose I can do the same thing except scan everything in as soon as acks are received.

[John of PA]

What scanning software are you using and what is the cost per year?