So you’ve scanned your receipts, organized the PDFs, and made sure everything is backed up. Is it safe to shred the paper?
The first thing you should do in answering this question is to consult a tax professional in your jurisdiction. Every tax jurisdiction has its own rules, and you want to make sure that what you read online is applicable to where you live.
What DocumentSnap Readers Do
When I ask DocumentSnap readers and people at events what they do, the responses I get are all over the map. Some people scan and shred everything, and others hold on to all the paper. Others are somewhere in between.
What The IRS and CRA Say
I highly recommend you read this article by Laura Kenway called Can You Shred Your Scanned Receipts?
She breaks down the difference between the IRS regulations (United States) and CRA (Canada).
For example, you can read about the IRS in their Proc 97–22.
In Canada, you can read this document: Acceptable format, imaging paper documents, and backing up electronic files.
The tricky part is with the interpretation of these materials. In fact, I have heard of people receiving different answers from CRA representatives depending on who you talk to.
Some sources say that you should keep the original source document, and some say that the electronic version is acceptable.
What Does Brooks Do?
At conferences people call me “Mr. Paperless”, so it surprises some people to hear that I personally keep all my tax related paper.
I scan, organize, and back it up, but then I keep the paper filed away. Why?
I figure with tax related stuff, it’s better to be safe than sorry. The last thing I need is some auditor having a bad day and looking for things to question.
Why Bother Scanning Then?
You might say “if you’re keeping the paper anyways, why bother scanning it in the first place?”
For me, going paperless is not about the elimination of paper. It is having things organized electronically to make me more productive. If I have the documents scanned, named well, and searchable, I can instantly retrieve any document I need right when I need it.
In her article, Laura Kenway says it well:
You are probably thinking, “So why bother to scan?” Two words … Audit Proof … or Audit Ready.
Wouldn’t it be great to have all your original source documents boxed in storage? If you get audited, you are ready.
In the meantime you have the convenience of not dealing with paper when you look something up. I personally think it is easier to search my computer than a box of paper.
I totally agree.
What Do You Do?
So what do you do with your tax receipts? Do you keep the paper, or do you scan & shred?
Have you ever actually been through an audit with electronic documents? How did it go? Leave a comment below.