How long do accountants need to keep files for

Some software programs allow clients restricted access to data files that reside in the virtual file cabinet so that they can obtain copies of their own tax returns, W-2s, and other supporting documents. This can be a real time saver when duplicate copies of items are needed. Another nice feature to have is the ability to e-mail documents, in encrypted format, directly to the client, who can then forward them to the intended party. Any firm planning to implement a new data storage system will need to investigate cost, design, ease of use, vendor background and experience, and security.

The firm should contact other CPA firms that the software vendor lists as references. The most important part of this type of data storage is a secure environment that allows for offsite storage. Offsite storage is critical; if there is a problem at the office, the offsite facility must be able to restore the data immediately. The cost of this service is based on the amount of data being stored. Two items to consider when deciding on this method of backup are the cost and the ease of retrieving data from the offsite storage.

However, the use of such a paperless system makes having a record retention policy all the more important. The following suggestions cover how to handle specific types of electronic records. Telephone conversations are generally not recorded or saved on computer. Federal laws allow for phone conversations to be recorded as long as one party has given consent, but state laws vary, so a firm's legal counsel should be consulted before recording and saving phone conversations.

It is always a good idea to have a disclaimer at the bottom of the fax cover sheet, similar to the e-mail disclaimer, explaining that it is not to be considered a professional service or to be used by any party other than the intended recipient. Most fax machines maintain records of what documents were sent and by whom, when, and where the documents were sent.

As such, firms may exercise additional judgment by applying a separate retention period for emails to help guard against this risk. Consult the article " Professional Liability Spotlight: How Social and Digital Media Can Be a majorrisk ," JofA , March , which discusses the risks that CPAs may encounter with electronic communication and how using it appropriately can help to avoid potential liability exposure.

Disposing of records is not as simple as separating recyclables from other types of refuse. Just because the retention period has passed, it does not mean that the practitioner's duty to protect the confidentiality of client data has also expired. Proper disposal of records is key.

When it comes to destruction and sanitization of paper and electronic records and media, consult best practices defined in reputable sources such as the National Institute of Standards and Technology's Special Publication - 88 , Guidelines for Media Sanitization , or ISO A. Many third - party service providers specialize in the collection and destruction of records based on regulatory or technological standards.

However, using a vendor does not eliminate the practitioner's responsibility to maintain the confidentiality of client data. If an outside vendor is used, due diligence must be performed on the vendor's processes for keeping the data confidential.

It is understandable that a CPA may accumulate client information during the course of providing services. While practitioners are expected to and should retain copies of this information for their own purposes and requirements, clients have the primary responsibility to maintain their own records.

To avoid becoming your client's filing cabinet, remind clients of their obligation to keep their own records, and let them know that the firm's workpapers are not a substitute for the client's records.

For more information about this article, contact specialtyriskcontrol cna. This article provides information, rather than advice or opinion. It is accurate to the best of the author's knowledge as of the article date. This article should not be viewed as a substitute for recommendations of a retained professional.

Such consultation is recommended in applying this material in any particular factual situations. Examples are for illustrative purposes only and not intended to establish any standards of care, serve as legal advice, or acknowledge any given factual situation is covered under any CNA insurance policy.

However, you can change your preferences at any time by clicking on the cookies policy. Making Tax Digital. Search for: Search. Accountancy resources How to be a better cashflow and budgeting adviser. Any exceptions to the above retention policies must be approved by the Engagement Partner in writing on a document retention exception log and approved by the Managing Partner.

See Exhibit A for a document retention exception log form. Exceptions should be very limited and the reason should be clearly documented. A list of files destroyed will be maintained permanently. Note: The purpose of this form is to document exceptions to the [Firm name] document retention policy. The exceptions should be very limited and the reason should be clearly documented.

Home Full Article. Documents to be retained We will retain firm business records to comply with Internal Revenue Service requirements.

Procedures for document storage Each firm should explain its procedure for document storage. Destruction and Control Destruction of documents is as important as their storage. Related content. Related events. View More. November 12,