File Preparation

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I have complete filing system in my basement. It holds all of my client’s Personal Tax Files and all the Corporate Files. I call this shelf my “Current” files. Last year, I took the time to pull out all of the older files and previous years’ files and place them in a banker box. Naturally, I documented each box by adding its contents into an Excel file, and numbering the box. I have 42 banker boxes stacked up in the corner of my basement, and this is what I call my “Archive” files. The boxes are stored on raised two-by-fours in case there might be accidental flooding in my basement. I have kept all of the archive files for exising clients because you just never know when you need to find information. Some clients and files date back to 1971 and I have one client that started in 1959. I just went on my own in March 2003, but after working with my father in his Chartered Accountancy firm for the past 18 years before it, I felt it best that I maintained all of the archived files in my possession when he retired. The clients that did not stay with me, or that I did not want to keep … I shredded those files when I started, at the permission of my father.

When I say FILES …. I do not mean your standard folding files or letter and legal sized files that you place in hanging folders. Here is a picture of what I mean:

A bundle of File Covers

I use ACCO or noname or Office Depot brand “Prong Paper Fasterners” with 2″ capacity and with compressors, with 2-3/4″ centers, which is the standard two hole punch size.

For all files, the latest information is punched with two-holes and placed ON TOP in the file. I never sort out information in the file, because it makes better sense to me to have the latest work done on the top and the oldest work done on the bottom. If the file gets too thick (about 1-3/4″ thick), I mark the file as “File #1” with comment on the cover “see File #2 for filing”. I will keep the immediately preceding File # with my Current files, and if there is a third file, I will move the oldest file into my Archive files and update my excel database.

I will dedicate pictures of my basement and filing systems at a later time .. when it is better organized 😀

Files of my Personal Income Tax Clients

PERSONAL TAX FILE – I have one file for every client. All information each year is just added to the top of the file. This way, when I pull a file out – I will have all of the information.

Files of my Corporate Account Clients

CURRENT FILE -I create a new file every fiscal year. Only the current year is included in the file, and during the year, if there are any notes or sheets required for the following year, I will place them at the top of the file. There will be a future article documenting how I prepare a file, the order of the documents and its contents inside this file. I normally keep three years of Current Files in my “current” filing shelves. When I am on the fourth year, I will pull the oldest file and place in my “archive” filing system that I described above.

>> All other files are maintained and numbered until they are too full to handle, with the latest information at the top of the file.

PERMANENT FILE – I will keep articles of incorporation, leases, copies of invoices for major capital expenditures, and any other permanent natured information such as share certificates, etc.

CORRESPONDENCE FILE – I keep all email correspondence, letters to clients, lawyers and any training instructions or manual I might have written that is specific for a client in this file. I will keep all letters to lawyers for dividends declared and copies of any resolutions I might receive.

CORPORATION TAX FILE – This is where I keep all of the T2 Corporation Income Tax Returns and any Notice of Assessments, or correspondence to and from Canada Revenue Agency. I prefer to keep tax correspondence in this file opposed to the correspondence file for obvious reasons to me.

T4 / T4A / T5 / WCB FILE – All the annual T4s, T4As, T5s .. both summaries and supplementaries .. are kept in here. There is usually a Typing Report attached to each year’s copy, plus a copy of an Enclosure Letter to my client in here. If I prepare the monthly payroll calculations, the reports will also go in this file. A lot of the time, clients will inform me of departing employees and new employees, their rates, date of birth, social insurance numbers, etc .. I will keep that information in here for the time, just in case, that I have to prepare a Record of Employment.

FINANCIAL STATEMENT FILE – This is the file where I keep all the original and final typed financial statements used in the preparation of the income tax return and the current file. There is also an original copy in my Current File (with color letterhead). In this file, I always attach a Typing Report that documents when the info came in, when it came out, when I prepared the Tax Return, when the tax return was filed, how many bound copies needed, how many unbound copies needed, and when it was delivered to the client. I also ask my client to sign in the “Approved By The Board” section on the Balance Sheet, to acknowledge that I have gone through the statements with them, and explained everything.

MONTHLY FILE – Obviously, this if for my monthly accounts. I keep track of monthly accounting by keeping all copies of bank statements, and monthly statements in a file, separated by a legal size sheet of paper. It usually lasts for about four months before I have to start File #2 (or the next number in line).

GST / PST FILE – If I am preparing the returns, I keep them all together. Chances of if a business will get audited, it will first be the sales tax collectors. So, I put everything inside the file, including a copy of the return and any assessments received, in the order that returns were prepared. If there was ever an audit, I could just hand over this one file, instead of all of the files … usually that’s all that may be needed.

OTHER FILES – Honestly .. I have so many danged file folders that if I think it is best to start a new file for a unique topic or situation – I do it. Why not?! Acco paper fasteners are cheap, and its easier to keep similar information together.

Well, that’s how I keep my client files, which by the way – are my property – not the clients. However, as I suggested in an the previous article (or next article if you are reading down the page) about keeping records, I am subject to the same rules just as everybody else is.

It’s always best to be organized and if something works for you, you should follow it. The above filing system works for me.

Take care.
HART
1800HART.com

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