I've been on my own now for 4 tax seasons. I keep trying to get more efficient. One place I think I can improve is the documentation I keep in my workpapers. Obviously if a client completes the organizer I keep that. What do the rest of you keep in your files? Currently I'm making copies to support all the amounts I enter (W-2s, 1099s, 1098s, etc.) And my file cabinets are starting to fill rapidly!
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Much like yourself I keep all supporting documents(1099,1098,k-1, etc.) I think you need to leave enough backup so that if you drop dead the next day someone else could follow behind you and figure out what you did. I do however scan my tax returns on to a dedicated drive so that in my files are only the 3 relevant years. This makes the hard copy file easy to manage. I know some people here have gone papaerless, which I might try but with such a large practice it can cost me thousands of dollars in equipment and time. -
Like you, I copy all original documents and anything prepared by client. I realized last year that the paper is getting overwhelming so have decided to go to pdf files burned on duplicate cd's, one copy in my fire proof safe and one copy in the bank safe box. I am in the process of making that happen now.
For prior years I am preparing by year, but for 2005 and forward, I am also preparing by client. I bought 2 monitors to be able to see prior and current year tax files and data files. It will be interesting to see if I can actually do it!Comment
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I have to argue. SorryOriginally posted by sea-tax
A good scanner is about $500. The software from Lacerte is around $500 per year. It is hardly thousands of dollars. The time I spend is less than the time you spend.Comment
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Originally posted by veritas
Veritas when I say thousands I mean thousands. I employ approximately 35 employees and a few part timers. 35 times 500 = $17500.00
If we go to paperless then I mean we will be paperless, I would have to buy 2 monitors for evey work station plus a scanner for every work station or least more than one scanner for that specific location. My partners and I are allocating at least 1000.00 per staion for this upgrade and actually are in the process with one office are smallest of going completely paperless. We have even bought Creative Solutions File cabinet to help. This program is not cheap.Comment
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I make a copy of every piece of (tax information) paper the client gives me and use that (with checkmarks for entered) as workpaper to input to the computer software. I keep all workpaper copies, return all original documents to the client, print tax return for client to file and backup tax return to pdf hard drive and finally burned pdf's to CD. Workpapers with my copy of tax return filed by client name in file cabinet. Note that my type clients are not interested in quick refunds or e-filing.
Yes... I have in the past needed to see old tax returns as old as 15-20 years and they were readily available. I document by the destruction of old paper files after about 7 years when client is no longer a client.Comment
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Originally posted by sea-tax
Oops I guess I assumed something incorectly.Comment
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All papers
I copy all backup documents for my client file, copies of W-2, 1098, 1099, etc. Worksheets that I use or the client uses. I also keep copies of correspondence and sometimes some emails. I backup and copy all emails on the computer, but sometimes just need to print them for the client file. Thank goodness as sometimes a few years later, either the client is lazy or can't find their original documents that we always return.
Haven't quite come to a plan to switch to paperless and implement. Just seems like such a horrendous project, altho I know my husband would welcome "moving" the file cabinets out of the garage and all the storage boxes.
I am also a paper person and need to see that actual paper and flip through them, so changing to paperless is really going to be difficult for me. Altho I keep trying and am getting better. But then I resisted computers in the mid to late 1980's and switch to Windows 93.
So I am like someone else posted, anxious to try dual monitors, if my computer hardware will permit. So I can have QB open on one and tax return on the other, or last year's tax return and the current year that I am working on. Anyone know more about this??
SandyComment
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Keeping "Stuff"
Way back when I first started in this professsion working for a CPA firm, we were taught to keep a copy of everything that was used for the tax return: W-2's, 1099's, any client information, whatever. Just to protect us from preparer penalties and lawsuits. I continued with that practice when I went out on my own in the mid 80's as an EA. I have a routine that I follow that really helps in preparing this year's return versus last year's. I do very few that are only W-2's and 1099's. Most have a C, D, E, and/or F, with anywhere from a few to many assets, plus transactions on 4797's. I enter all client information from proformas provided by my software. I put all the information in the order of the proformas/tax return and then copy it. As I enter it on the proforma I follow the prior year's information in the same order. And, as I enter it on the proforma, I highlight it with a yellow marker for income or pink highlighter for a deduction. After entering all information I run a tape of the client information, yellow = +, pink = -. Then I run a tape of the proformas and should arrive at the same check number. I use a reconciliation sheet that I developed to add or subtract items such as standard deduction, 1/2 SE tax adjustment, personal exemptions, depreciation, 50% meals disallowance, etc. This should arrive at the taxable income of the return after I enter it on the computer. I also estimate the tax liability and balance due so that I can check my manual calculations of EIC, etc. I know a lot of this isn't necessary, but it helps keep up with tax preparation without relying 100% on the computer. I hired a person last year to assist part-time during tax season. He tried to rely on the computer to do everything instead of following my procedures. It took him longer to do the return and check it and he just couldn't get the hang of "thinking". He didn't last the full tax season. This procedure has helped me through audits as the auditor always compliments me on the well-organized files and substantiation that makes their job easier. And, it has helped when there were questions as to why I used or did a certain thing on the return.Jiggers, EAComment
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trust
Although my procedures are not quite the same as Jiggers, I agree it is necessary to document with workpapers or copies of documents/receipts in order to properly represent the taxpayer on audit years later. Good clients stay with you NOT because of your price but because they "trust you" and trust you will have the information/documents needed to represent them on audit and for future tax returns. Lost documents due to fire or computer crash is breaking that trust and is an excuse not acceptable in our profession.Comment
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Documentation
One additional comment. I request that my Schedule C, E, & F clients provide me with either copies of cancelled checks or invoices for asset purchases that will be depreciated. Many times I find "supplies" also included on that invoice that can be written off that year and not depreciated. And, during a recent audit, the auditor requested a copy of the invoice/cancelled check for certain items on the depreciation schedule. I had those in my file and produced them immediately. They client would have taken two days to locate in his "storage shed files". Not all clients cooperate with my request, and I use their date/total for the depreciation schedule.Originally posted by OldJack
My paper files are starting to accumulate. Starting with this next tax season, I am going to start putting each tax return and related work papers in a separate folder. This will be archived after I do the following year's return. And it will be destroyed in 6 years. I will put the asset purchased information into a file that will never be destroyed. The items will be removed as they are sold or junked and filed in the appropriate year's folder. Takes time, but my clients like my files for quick answers. And they pay me for the service by way of my higher fees than my competitors.Jiggers, EAComment
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Need information on setting up two monitors
How and where do you get information for setting up for two monitors? Do you need anything beside another moniter. I am paperless, but I have to jump back and forth between last years and this years return. Works OK, but two monitors sounds great.Comment
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I am by no means a computer expert but I think you have to install a video card into your computer and then you should be able to hook up two screens.Originally posted by Piglee
I would also suggest calling your software company to check with them they may have certain requirements or some advice.Comment
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I have gone paperless and I have experienced savings, not added cost. I do use dual-monitors, but we have used them for the last 5-6 years. They are only to allow the client to follow along. We use Brother MFCs at each workstation, street price <300. We use PaperPort, street price <75. We have found that we save a significant amount of time not dealing with paper. Staff can find and view scanned records faster than finding them in file cabinets. We have found that the expense of the staff time to scan ~35 years of back years is less than the yearly cost of record storage. Perhaps we have been fortunate, but we have found significant savings both from scanning all the old records, and from minimizing the use of paper going forward. YMMV.Comment
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What to keep
For basic tax returns I suggest keep the 8879, things with withholding, and any unusual documents. Most source documents are never looked at again. Key them correctly into your system and use the electronic software to get the data you need.
I don't suggest scanning in papers you will rarely need to view. Instead take the kit mentioned above and file them in a bankers box. The only time I need them is when a client wants a copy of the w2 or to confirm an error on a tax return.
Why copy a 1099 Int thathas $18.00 of interest on it?
This does not work for high end clients. I try to keep as little as possible.
Mahalo
BjornComment
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