Digital Scanning – A Better Way to Store Documents

digital scanning | Digital Scanning – A Better Way to Store Documents | We live in a world that is primarily dominated by digital. From banking to airline tickets, from invitations to precious photographs, many of us will turn to online space to store and hold valuable items and documents.

While decluttering is a significant trend right now, there are some documents that you will need to keep hold of for several years to comply with legal and tax requirements. This fact is especially true for businesses, but the physical bulk of paper can take up valuable space – especially if you are renting or leasing an expensive office!

Again, we can turn to the digital realm for a solution. Digital scanning offers an opportunity to keep critical data and documents safe without having to find storage space for hundreds of files. For this, you will need a scanner and see this guide to know how to buy a scanner. Passwords and additional security can also help to keep these documents secure, allowing you to comply with data protection regulations more easily.

What Do I Need To Keep?

Businesses are required to keep certain essential documents for a set number of years. These include:

  • Business Income Tax Returns and Supporting Documents

Tax returns can be tricky, but keeping a copy of your business tax return can help streamline the process. It is also a good idea to store any correspondence you have with the IRS in case of future disputes or queries. According to the IRS, you need to keep records regarding income until the “period of limitations” expires – they have up to 6 years to pursue you for failing to report income for amounts higher than 25% of gross income. In the event that you filed for a deduction, you should keep the records for seven years. 

  • Business Asset Records

If your business involves property, you should keep records until the period of limitations for that year ends. These are essential for calculating attributes such as amortization, gain and loss, applicable depreciation, and depletion deductions. Deeds or titles for a property of vehicle should be securely stored until you sell the asset. 

  • Employment Tax Records

The employment tax records for all employees must be held for a minimum of 4 years after the date those taxes were due or paid, whichever comes later. Some essential details that need to be stored include:

  • an employer identification number,
  • names,
  • addresses,
  • social security numbers,
  • wage and tax amounts,
  • dates of wages paid,
  • annuity and pension payments,
  • tax deposits, and 
  • employment dates. 
  • Human Resource Files

As well as tax records, businesses should also retain any files which relate to current employees. Maintain these files for the duration of employment and seven years following the employee’s departure. In the event of an interview or application which does not lead to a hire, retain records for at least three years.

Any records regarding accidents at work should be kept for a minimum of seven years after the resolution or ten years if the case involved paying workers’ compensation benefits. Keep any discrimination claims for at least four years following the conclusion of the case.

  • Business Ledgers

It is a good idea to store copies of ledgers that offer profit and loss statements, financial statements, journal entries, and check registers. Storing these particular documents ensures that you have a solid, factual record to follow in the event of a dispute. Businesses should also permanently retain annual reports, meeting minutes, information on the Board of Directors, and business formation documents.

Keep financial documentation such as invoices, expenses reports, and accounts payable/receivable records for at least seven years.

  • Canceled Checks

These may be tempting to discard but should be retained for a minimum of seven years if they are not a supporting tax document. In the case of the latter, it is essential to adhere to the IRS regulations.

  • Bank Account/Credit Card Statements

Keep all credit card statements or bank account data for a minimum of seven years. Extend this duration if tax purposes require these documents. It is possible if these are not supporting documents for tax, to keep the annual statements for seven years, and dispose of monthly reports annually. 

Why Switch To Digital?

Physical files and documents can provide a source of comfort as they are tangible proof that the data is accessible when we need it. The thought of physical records being whisked off into the ether can make the idea of switching to digital concerning and often overwhelming. However, your business could enjoy a vast range of benefits from making this switch.

  • Space saver

Office space is not cheap, and switching to digital is a great way to free up valuable floor and storage space. This change could result in you needing a smaller workspace, and offer a significant saving on rent. 

  • Greater security

While you can store paper files in a secure cabinet, room, or building, this space is still vulnerable to physical entry. While electronic records are not infallible, the leaps in technology allow you to set up sophisticated security defenses, which can make documents far more challenging to access, and this reduces the chances of them falling into the wrong hands.

  • Greater safety

One of the significant downsides to paper is its fragility; all it takes is a leaky roof or bad electric wiring for permanent damage to occur. Storage options online mean that even if the device holding the data is damaged, you can access your backup in cyberspace as needed. 

  • Easier access

Digitally storing files can also make essential documents easier and more efficient to search and find, and in a world where time is money, this is very welcome!

What Do I Do?

If you are ready to embrace digital scanning, there are plenty of options available. The first step is to source a reputable and reliable digital scanning service with the skills and expertise to transfer your documents to an electronic format.

Remember that data protection is a significant factor when dealing with potentially sensitive documents, so it may be necessary to draw up a confidentiality or NDA agreement with the company you choose. However, most reputable providers will already have these in place.

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