Tax Backup

Last week one of the phone companies had an outage in the Midwest. It didn’t directly affect me but it did make it harder to contact some clients. I started thinking about what backups I have in place should something like that happen to me.

At the same time, I dealt with a lot of requests from tax clients for copies of returns, W-2s and other info they brought to me. I give all clients a paper copy of their return with all of their original info. The only thing I keep is a copy of any W-2 and anything with withholding. I may scan some of the other docs but it depends on the return. In fact, my letter of engagement specifically states that I will only keep copies of what I am legally required to keep. If a client requests info, I will give them what I have but I may not have what they are wanting.

But what would happen to those clients if something happened to me? I could leave this evening and be in a car accident. Or, I could become very ill or up and take an extended vacation. Or, win the lottery and quit. Where will my clients get the info they want?

I know that many of they are calling me because it’s easier than actually looking for their return and paperwork. But too many have lost their paperwork and the only option would be to get tax transcripts and wage statements from the IRS. It still doesn’t get them their business and Schedule A notes.

So – The Soapbox – Using a tax pro for your tax returns doesn’t get you out of taking some responsibility for your tax situation. All taxpayers need to keep a copy of their tax return and all supporting documents for at least 3 (I suggest 5) years. You may never need those documents. But if you get audited or even need a copy of your return for a bank loan you’ll be glad you kept them. This is especially true if your tax pro is no longer in business.

In this computer age, we talk about backing up our data and having redundant systems. That goes for your taxes too. A tax pro can operate like a backup for some of your tax documents and for the return. But you need to maintain the originals by properly storing your return and the documents which back it up. And I suggest that you have a personal backup of that information too. You can never have too many backups of your tax docs.

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