I have a paperless office. Sorta! Ok, let's try this again, I have a paperless office as much as fear of the IRS will allow me to have one.
When I started preparing taxes, the boss had 6 -4 drawer file cabinets filled with taxpayers files. Over the summer, folders for clients who haven't been in for a while were pulled to make room for new clients. Today, I have half a file cabinet drawer reserved for client files. I scan everything I can. What I do have to keep, signed electronic forms (8879), signed EIC checklists and client summaries are in notebooks during the year and later boxed and archived. I keep paper copies because if the IRS does an audit, I don't want to print out the requested files. It is quicker to pull them out of a notebook or file and the faster I can get an auditor out of the office, the better. But now I will have to add 2 consent forms and a checklist to the mix.
Due diligence has become a major issue for the IRS. I have been using an EIC checklist for years. It makes sure that I have covered all the requirements for the credit and the taxpayer(s) receiving EIC sign that they did not lie to me. But the trend is to have an income and deduction checklist. If asked, the preparer can show that they followed the checklist during the interview. It's more reliable than, "I always ask about that." But it means another thing to scan and to keep.
Privacy is a major issue for the IRS. They have always taken a strong stand on the sanctity of taxpayer records. We have had to have a signed opt-in before we could release info to a third parties. For non-tax products we offered, RALs, IRAs, investments, this was in the paperwork. When a client signed their bank application for a Refund Anticipation Loan, it was part of the app. Now it must be a separate document. AND before even get that far, I have to have a signed consent to use tax return info to offer a client a bank product, IRA or investment. If they apply for a RAL, I will have two almost identical "consents" for them to sign.
The real world scenario will go like this: Sue Taxpayer comes in to have her 2008 tax return prepared. A income/expense check list will be used to prepare the return. If she qualifies for EIC, another checklist will be used to ensure that she qualifies and she verifies by signing. Once the return is done and she check/signs the summary sheet that all names, SSNs and addresses are correct, she will have to sign a consent to use before I could offer her a bank product (or IRA or investment.) If she wants a RAL, she will have to sign another consent so I can release her tax info to the bank. Besides this, Sue will be signing the Electronic Signature form so I can e-file the return and the bank application itself (in 3 places.)
The only thing Sue will not have to sign is the actual return. While all signed forms will be scanned, I will have to figure out a system to keep them easily accessible should the IRS come calling. So much for paperless.
