A Clean Start: Purge Shredding for Tax Season

It’s that time of year again: tax season. For many, this can be a stressful and overwhelming time, but it doesn’t have to be. With purge shredding and the right tools, you can make tax season a breeze while safeguarding confidential information.

In this article, we will discuss what purging is and how it can help you have a clean start for tax season while maintiaing compliance.

What Is Purge Shredding?

Purge shredding is the process of getting rid of unnecessary and outdated documents and paperwork. This can include old receipts, bank statements, and other financial documents that are no longer needed. With a purge shredding service, you can declutter your space and make room for new and important documents.

Why Is Purge Shredding Important for Tax Season?

Purge shredding is especially important for tax season because it allows you to have a clear and organized space to work with—letting you easily find the documents you need and avoid the stress of searching through piles of paperwork. This not only saves time and increases productivity, but it also ensures that confidential information is properly disposed of.

How to Prepare for a Tax Season Purge Cleanout

The first step in secure document destruction for tax season is to gather all of your financial documents in one place. This includes bank statements, receipts, and any other important documents related to your income and expenses. Next, go through each document and determine if it is necessary to keep it for tax purposes. If it is outdated or past its records retention schedule, shred or dispose of it properly.

Utilize Document Management Software

One helpful tool for purging during tax season is document management software for accounting, which can help you keep track of your income and expenses as well as organize and store important documents. It can also assist in reducing manual tasks with workflow automation. With a document management system, you can easily purge and keep your financial records organized and up to date digitally and securely.

Make Document Shredding a Year-Round Practice

While one-time shredding is important for tax time, making it a year-round practice is also beneficial. By routinely using bulk paper shredding services to declutter your financial documents, you can avoid the stress of purging all at once during tax season. Regularly scheduled offsite shredding enables you to dispose of unnecessary paperwork easily by placing it in a secure bin serviced according to your rotation schedule.

Shredding During Tax Season: FAQs

Q1: What Are the 5 Types of Business Records That Need to Be Kept?

Small-business bookkeeping involves choosing an accounting method that suits your business and accurately tracks your income and expenses. Your line of business determines the kinds of records you must maintain for federal taxation. Here are the five common types of business records to keep:

• Accounting records
• Bank statements
• Legal documents
• Licenses and permits
• Insurance documents

Q2: What Supporting Business Documents Should I Keep?

Business transactions generate supporting documents like receipts, invoices, paid bills, and more. These are vital for accurately documenting accounting records and for corroborating financial information in tax reports. The IRS recommends keeping the following supporting documentation:

• Gross receipts
  • Cash register tapes
  • Deposit information (cash and credit sales)
  • Receipt books
  • Invoices
  • Forms 1099-MISC
• Purchases
  • Canceled checks or other documents reflecting proof of payment/electronic funds transferred
  • Cash register tape receipts
  • Credit card receipts and statements
  • Invoices
  • Expenses
• Travel, transportation, entertainment, and gift expenses
• Assets
  • Purchase and sales invoices
  • Real estate closing statements
  • Checks that have been canceled or other documents specifying payee, amount, and evidence of payment/electronic funds transfer
  • Employment taxes

Q3: What Business Tax Records Can Be Shredded?

Old Tax Records

Begin by eliminating outdated tax records that have crossed the prescribed retention time by the IRS. The IRS generally advises retaining tax records for three years after filing tax returns. However, if your business has incurred losses such as bad debt deductions, the IRS suggests retaining tax records for a minimum of seven years.

Disposing of old tax records can aid in preventing unsolicited access to your company’s confidential financial data.

Employee Records

It’s mandatory for employers to retain employee records for at least four years. After this period, it would be wise to contemplate destroying these records to guard your employees’ confidentiality and avert identity fraud.

Examples of employee records include:

• Payroll documents
• W-2 forms
• 1099 forms

All data containing personal details of your employees—such as their Social Security details, payment specifics, or residential addresses—should be destroyed once the necessary retention period is over.

Credit and Bank Statements

Credit statements and any type of bank records should be handled carefully due to their highly confidential nature. Banking records may have account numbers, card information, and more, so you should prioritize shredding these documents when you are done with them.

Plus, this information may also be located in your online banking account, so retaining them for over a year for tax reasons (or for whatever duration your bank suggests) is unnecessary.

Invoices

You should also consider shredding bills. Keep invoices and receipts for the items your company sells. The IRS advises that these documents be retained for tax reasons and deductions for at least three years, although you may keep them for up to seven years, depending on your company’s requirements.

Personally Identifiable Data

One useful guideline is to destroy any documents that include personal details such as names, locations, contact numbers, or email addresses. Often, the aforementioned sensitive information is found on the above-stated documents, but it’s crucial also to destroy any other materials carrying this personally identifiable data (PID)—particularly information related to your staff or company.

Final Thoughts

Tax season doesn’t have to be daunting. By incorporating a one-time paper shredding service into your tax preparation routine, you can have a clean start and make the process much smoother. You can also utilize electronic records management software with built-in retention schedules and business shredding services regularly to stay organized throughout the year. With these tips, you can conquer tax season with ease and on top of your finances.

Have you tried purge shedding for tax season?