Paper and digital technology each has certain capabilities, functions, and conveniences the other lacks.

The Myth of the Paperless Office.

Reality Check. Paperless Home Office.

Love the convenience of modern technology or do you just want to save a tree? If you think digitally storing your paper records will help you clear your clutter, you are not alone.

Small portable scanners and online scanning services are becoming more available. Going paperless is still a hot topic. Technology has simplified bill paying, bank services, information access, research and communication with family, friends, and colleagues.

BUT, and yes it’s a big but, technology is limited when it comes to accessibility.

More importantly, the IRS does require original paper documents to support computerized records and a scan is a computerized record.

If you use a computerized system, you must be able to produce legible records of the information needed to determine your correct tax liability. In addition to your computerized records, you must keep proof of payment, receipts, and other documents to prove the amounts shown on your tax return. IRS Publication 552

The reality is, nine times out of ten, you are keeping a piece of paper to prove yourself to the IRS. So before you jump into your “paperless” home office also consider the following:

• There are a limited number of support records you need to satisfy the IRS and smaller number of vital documents you must retain for personal and financial reasons. Would a digital copy of these items give you peace of mind?
• The majority of people would only need one file drawer to keep the IRS required three years of records. This same drawer would have plenty of room for important financial, health and home records. Would it be easier for you to scan receipts and digitally log the details required by the IRS than make a quick note on the back of receipt and place it a yearly tax file?
• Only those who run a home business would need one additional file drawer to store the six to ten years of recommended support documents. Will your bank and Credit Card Company provide six to ten years of statements online? If not, how will you access these if requested by the IRS?
• Technology doesn’t cure procrastination or fix a poor system. Good categories, action and maintenance are still required. Do you currently have a categorizing system for filing your papers and are you actively maintaining your records?
• You still need to know what papers to keep, why you should keep them and where you will find them. Do you know this information?

A digital system could work well for you if you answered yes to the majority of questions above. Even then don’t take technology for granted. We expect our digital records to remain accessible for years. Realistically technology has a number of hazards that do not exist in a good old fashion filing system. Relying on hardware, software, online applications and third party practices create conditions outside of our control including,

• Privacy issues.
• Web service outages or unavailable access.
• Computer start-up issues and crashes.
• Computer viruses and spyware.
  If you have file-sharing software on your computer, beware. All the information on your hard drive is at risk.
• Corrupt digital media.
• Hardware technical problems.
• Software bugs and crashes.
• Outdated technology.
  Technology changes daily. Will your records be converted, accessible and available in three to six to ten years?

I ask you this; would it be more convenient, more efficient and safer to scan paper records than it would be to create a good system for filing them? For me, no. Your lifestyle and needs may draw you to a different conclusion. There are a number of “right” ways to get something done. Going completely paperless may not work for you. Be open-minded. Be creative. Find a solution that works for you and share it here.