A few weeks ago, the Dutch tax office deleted 100,000 tax returns filed by businesses. When they restored the data from their backups, they came up 35,000 returns short. That’s 35,000 companies, large and small, which have to file again. This is especially bad because businesses are required to file online and the tax office’s computers are still not working properly, which means that in addition to re-filing, many companies will have to pay late fees.
Just to make the situation worse, the Dutch tax office refuses to accept its own online confirmation as valid proof of e-filing. (The Ur-Guru’s words on this subject are unprintable.)
Makes me grateful for the good old IRS—whatever its failings, the Infernal Revenue Service isn’t that illogical. But this story is proof that you can’t count on the government to keep your records safe.
If you still do all your taxes on paper, keep photocopies of the forms and any money you send in, and keep the cancelled checks. For those who, like me, use software to prepare their taxes, keep digital copies as well as printouts.
I’ve used TurboTax Web by Intuit (I’m a Quicken user) to prepare my taxes every year since I became self-employed. Some people prefer the offline, buy-a-CD version because of concerns about internet security, but I haven’t had any problems with the online version and I figure it’s not really any riskier than most of the other commerce I conduct online. Probably less risky, in fact, even though my Social Security Number and EIN are on the tax forms, because none of my bank account or card numbers is on there.
But I digress.
After TurboTax leads you through all its questions and sends you digging through your records (and when will I learn to record my mileage on 1 January?), you get an opportunity to preview your taxes in PDF form. Likewise, after they are completed and filed, you get to print a PDF copy (and this one will say “copy”) on it.
Naturally you should print this, but you should also save a copy of the PDF, encrypt it, and put it onto a CD. The files aren’t large, so you could fit several years’ worth onto one CD, but there’s also something to be said for putting each year on a separate CD, labeling it, and then storing it in a safe place. I recommend encrypting the PDF file itself or putting it into a password-protected .zip file. Use a good-quality brand-name CD and keep it in a jewel case to protect it from dust and scratches.
And store your e-file receipt with it, just in case there’s a massive computer failure at the IRS headquarters.