Safeguarding Data

It can be extremely expensive, emotionally devastating, and close to impossible, to recreate what could be years of lost data as a consequence of failing to ensure appropriate safeguards.

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Backup Data Regularly

Your electronic data is at risk because anything can happen suddenly and unexpectedly, like a system crash, data corruption from viruses, hacking/ransome, software conflicts, severe weather, fires, floods, and theft. For these reasons, it is highly recommended that you schedule a daily data backup to an offsite, cloud-based service. In additon, to further safeguard your accounting data, turn on backup reminders in your software's preference settings to prompt you to backup when you exit a work session.

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Retain Documentation

According to the IRS website, as of August 20, 2024, physical documents should be retained as follows.

The length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.

Period of limitations that apply to income tax returns:

1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.

2. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.

3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.

4. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.

5. Keep records indefinitely if you do not file a return.

6. Keep records indefinitely if you file a fraudulent return.

7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

Be advised: Some records may need to be retained permanently, when questioning whether to retain a document, throw it away, or shred it, research more than just these IRS guidelines.