Ask the Experts: Are electronic records the same thing as paper records?

Ask the Experts: Are electronic records the same thing as paper records?

The number of people using their computers to prepare tax returns and manage investments has skyrocketed in recent years. In fact, many people have completely eliminated the paper trail in their financial lives, preferring instead to receive and store all their financial statements electronically. But are electronic records adequate?

Generally, an electronic record has the same worth as a paper record for tax and legal purposes. And the rules for how long you should keep electronic records are the same as for paper records.

But if you decide to go the electronic route, you must take extra steps to make sure your records are safe. This means keeping at least two copies of your electronic records (e.g., one copy on your hard drive, and another copy on a removable hard drive device or burned onto a CD or DVD). In fact, even if you have paper records, if you own a scanner, you might consider scanning important records into your computer. And if you need help deciding how to organize your documents, many retail stores sell software designed to simplify financial recordkeeping.

Many banks and financial institutions now keep electronic images of your financial records, such as monthly canceled checks or quarterly brokerage statements. If you don’t download important items and save them on your own computer, inquire about the institution’s policy on how long it will store your records, and how you can access them if you need them. You wouldn’t want to lose a tax deduction because your bank didn’t keep an electronic image of a canceled check for a sufficient period of time.

So, while electronic records can help cut down on the volume of financial paperwork you need to store in your filing cabinet, it’s your responsibility to make sure you can access the records if you need them.