Go Paperless? Don't believe it for a minute

We all see the encouragement to "go paperless" and save everything as a digital file. I had bought into that as well, but no longer.

However, on March 8th of this year the IRS announced it was doing a full, random audit on my store, The Keeping Room (and it is still ongoing) and believe me when I tell you they want EVERYTHING on paper. If you saved it digitally, you WILL be printing it out! Bet I have made close to 1,000 copies to date for paperwork they require that I had saved digitally.

Every paycheck stub, every credit card receipt, every invoice matched to every sales ticket - gotta have it. All your 1040's are no good as a Turbo Tax file, you have to hand them printed copies, including all schedules. Same with 1120 Forms for Business. For those who have never undergone an IRS Small Business Audit, its both stressful and a huge time-eater, which is why you may have seen a slight drop- off in my forum posts since March. This audit has consumed a lot of time and it has taught me to start keeping better records and file everything where you can find it easily. With the IRS, it's the opposite of our justice system - you have to prove everything, the burden is on you as the business owner. If you can't prove it, your are bingo'ed.

Did you know the IRS doesn't do email? So when they are back at their offices and request a 50-page report, you can't send them a .pdf, it has to be printed out and go out on the Fax Machine or be mailed. Crazy stuff.

I have gone from a mediocre record-keeper to a strict one, everything from now and in the future will be kept, and all on paper. Word to the wise!

That sounds like a total nightmare. But I am not surprised. I had an Aunt who passed away in 2010. We found all of her tax records complete with all the accompanying documentation back to 1959. She was the kind that kept every ATM receipt and put it with the bank statement that it was on. Same thing with credit cards. But having to do that for a business, all the receipts and invoices. That's a full time job doing that.

I print out my personal income taxes from Turbo Tax and file them in a drawer with all the documents to prove everything that's on them, but that is easy on a personal level. I'm sure as you said, a business requires a lot more work.

It's a miserable experience, I don't recommend it to anyone!

That does sound like a miserable nightmare. And I would be very surprised if when you fax it to the IRS if it doesn't go into a digital file, not printed.

Update from two months ago.

It what has to be the weirdest experience in business - EVER - the IRS guy just up and vanished. From full-bore, in-the-store-checking-all-the-paperwork, to NOTHING. Gone. Kaput, no Goodbyes, See-ya, You're-Good-To-Go, nothing. I called my accountant over this many times and she said "Don't worry about it - there is no closure. Don't call him, if he needs you, then he knows how to find you. If he has all he needs and closes out the audit, you won't hear a thing. Let sleeping dogs lie."

How strange.

Strange, but.... yes, let sleeping dogs lie, don't kick the dragon....