Source: Forbes.com

The rains and extreme weather continues to pound parts of the country this week. Earlier, I posted about taking steps to protect your personal documents and financial records in the event of a weather related disaster. But what about your business?

When it comes to business,

Scan, scan, scan. Businesses deal with so much paper. Scanning and digitally archiving files can be stored and accessed easily – great for tax purposes. It may also save storage space (you should see our stacks and stacks of files – and we do scan) as well as offer piece of mind.

Have a back-up plan. If you scan, make sure those records are in at least two places. Consider an offsite space for storage records – and don’t forget about the cloud!

Ask about virus protection software. The best financial and backup system in the world is useless if it’s destroyed or compromised. Virus protection software can help safeguard your documents – but don’t allow employees to add software willy-nilly. Consult with a tech professional who can offer practical advice on the best software for your needs.

Pay attention to the statute of limitations. These are not necessarily the same as those for personal tax returns. For most excise, income and payroll tax returns, the statute is three years after the due date of the return, or three years after the return was actually filed, whichever is later: there is one quirk in the language for forms 941 which specifically sets the statute at three years from April 15 of the year following the year for which the return was due or 3 years after the date the return was actually filed, whichever is later; the same language applies to forms 943, 944 and 945 (together with forms 941, they represent the FICA and withholding series).

Remember that not all tax forms are created the same. Employee benefits forms vary since the rules and deadlines themselves vary: generally, the statute is 3 years if the information is disclosed and six years if it is not disclosed on the form. Keep in mind that while the filing of the form 5330 (Excise Taxes Related to Employee Benefit Plan) generally starts the statute of limitations for excise taxes relating to benefits, that is not the case for section 4975 excise tax for prohibited transactions – the statute for those starts running with the filing of the form 5500 (annual report).

Don’t get hung up on the statute of limitations. While you shouldn’t save absolutely everything, that doesn’t mean your documents should go to the shredder on the day that the statute of limitations for tax purposes has come and gone. Remember that there may be other issues – like employment and human relations – that have their own statute of limitations. Be sure that you review any legal requirements for retaining those files before tossing them. Ditto for career-specific rules like those that govern lawyers, accountants, doctors and the like: you may be subject to professional rules for retaining and/or disposing of client files.

Train your employees. Figure out which of your records should be saved ahead of time – that is, before the question comes up (again, pay attention to those statute of limitations). What do you do with canceled checks? Credit card statements? Bank statements? Old tax forms? Payroll reports? Create a system and a schedule for shredding, filing and scanning, train your employees how to follow it and stick to it.

Be flexible. While paying attention to a system is important, it’s also smart to revisit your plan on a regular basis to make sure that it still makes sense. Things change. Employees leave. Clients come and go. Businesses expand and shrink. Technology changes at breakneck speed. Tax laws and regulations – including employer reporting and payment obligations (think Health Care Act, for example) – are constantly evolving. Pay attention to the details and don’t get stuck in a dangerous rut.

Don’t be pound foolish. If you take away just one bit of information, keep this one in your pocket: hire professionals. Don’t leave the integrity of your tax and financial resources up to employees who might transition out of your company or convince yourself that you might get to taking care of the records yourself “some day.†As a business owner, the two folks you should always have on hand: a good tax professional (accountant, lawyer or reliable tax preparer) and a payroll company. Payroll issues get more businesses into trouble than any other single tax issue I see with respect to corporate taxes. Payroll companies are not expensive and worth every penny – get a good one and use it.