Okay, now for a couple of specific issues:

Tax Records (U.S. version)

It is a commonly held belief that the IRS requires you to keep your tax records for seven years.  Actually, according to the records manager of a company I used to work for, that’s not quite the case.  According to her, the IRS regulations require you to keep your records for three years.  However, if they do decide to audit you, they can go back seven years.  And since no one would want to depend on an adversary for records concerning his or her own interests, everyone just automatically keeps seven years’ worth of records.  And just so we’re clear, that means not only your tax filings, forms, and schedules, but also all of the supporting documentation:  receipts, 1099 forms, spreadsheets, QuickBooks reports, e-mails that pertain to the taxes, and anything that would be necessary to defend deductions or interpretations, most especially any communications from the IRS.  In this area, it’s better to err on the side of caution; if you’re not certain you need to keep it, you should probably keep it in the file.

Contracts (U.S. version)

Every state in the U S has regulations that define certain types of records which businesses must keep, even self-employed businesses like writers. As long as you as a writer are a one-person shop, most of them won’t be an issue.  If you get to the point, however, where you are paying people to perform business functions for you (accountant, secretary, researcher, etc.) then you need to educate yourself on what your state requires.

There is one type of business record retention about which even the one-person writer shop needs to know, and that is your contracts and agreements.  Almost every publishing contract between an author and a publisher or a publishing platform will contain a clause that says that in the event of disagreement between the parties, the contract is to be interpreted under the laws of a certain state.  Most of the traditional publishing contracts indicate they will be interpreted under the laws of New York.

Obviously you want to keep the contract or agreement as long as it is active; in other words, as long as there are obligations between you and the other party which must be observed or performed.

But at such point in time as the contract has basically terminated—all parties no longer owe anything to anyone under its provisions—what do you do with it then?

Hint:  don’t throw it away.

Every state has statutes or regulations that stipulate how long such a terminated contract must be retained by the parties subject to it.  Here’s the summary:  if you or your publisher reside or work in Louisiana, or if the contract says it will be interpreted by the laws of Louisiana, the rule is to hold it fifteen years past termination.  All the other states have settled on a term of five years.

In states other than Louisiana, the only caveat I would raise would be if the contract had provisions that dealt with finances, you should probably keep it until the last year it operated has passed its seventh year tax retention.

And finally, the contract file should contain anything that would have a bearing on the intent of the parties in drafting the agreement, as well as anything that might bear on how it should be interpreted.  So yes, you may need to keep some letters or e-mails to support that contract.

In summary: be organized, back everything up to protect yourself, and manage your records.

Contrary to popular belief, you as a writer don’t have to keep every single piece of paper or e-mail or e-documentation that comes your way.  And you especially don’t have to keep it forever.  However, just like any business owner out there, you need to have a good idea as to what kind of records you need to keep, and you need to have some idea as to how long they should be kept.

This gets down to the nitty-gritty, detailed, organized, obsessive, and—dare I say it—boooooriiiiing part of being a writer.  Keeping your records updated, filed, and organized is a necessity; particularly in a profession that undergoes regular and sometimes heightened scrutiny from the taxing authorities, and also has to deal with contracts.

Get Organized

Yes, you absolutely need an organized filing system.  No, it doesn’t need to be very complicated, as long as it’s logical.  It can be totally paper based, or totally electronic, or both.  But it has to exist, and you have to maintain it, or the risk of you getting into trouble really escalates.

You can go totally electronic:  scan all your documents into digital memory, even your signed contracts.  There is case law now that has established that a scan of a signed contract is just as valid a record of the agreement as the signed paper original which was scanned.  And there are businesses out there that destroy their originals as soon as they are scanned.  No drawers full of paper, no clouds of paper dust.  But there are also disadvantages:  you have to stay on top of the scanning and not let it pile up, or you never get it done; you have to keep your electronic files just as organized as you would the equivalent paper files; and you have to remember to back up all the files regularly.  Daily, if you work frequently.  Definitely every time you add, change, or delete data.  More about that later.

You can go with all paper, but in the internet age, a hybrid combination of paper and electronic is more practical:  keep your most important documents in paper, but go with electronic copies of correspondence, work notes, etc.  But you still have to have an organization method, and you have to stay on top of the filing, both electronic and paper.  And make sure the electronic records are backed up.

The big thing is to have a method, to be organized in a manner that works for you and is efficient.  But make sure somebody else knows how you do things, because there are always those odd moments where you’re not at home and something needs to be found.

This is especially important when it comes to your financial records, since they will be the foundation of your tax filings.  You can use an application such as QuickBooks, or you can just build all the revenue and expense records into a (relatively) simple spreadsheet.  But you have to do it.  And while you’re at it, whatever method you use, make sure it’s backed up frequently.

Myself, I organize everything by the writing project.  Work notes, drafts, contracts, payments, mail (both e- and paper), everything except tax documentation gets put under the header of a project.  I find it a simple yet convenient structure, because 99% of the time if I need to look something up, it’s the project name I’m going to be searching under.  My tax forms and supporting documentation I organize by tax year.

Back It Up

And again I say, back everything up.  If your house or office floods, or burns, or is robbed/vandalized, or is in hurricane country or tornado alley, and you’re in the middle of an IRS audit or a litigation about contract compliance when the disaster happens, just how valuable would that back-up file be to you?

Even if you like the paper records, there is good reason to scan all the important ones, such as your contracts, your tax returns, and all your current income and expense records.  This will allow you to back them up in a cloud service such as Carbonite.  If you don’t want to trust a cloud service, then at least copy the files to flash drives or an external hard drive and store them someplace else.  That doesn’t mean in your bedroom closet, either.  I mean someplace miles away from your location.  If you or your spouse has a day job, take them there and bring the older ones back home.

In the words of the old platitude, don’t put your eggs all in one basket.  Do something to mitigate the risk.

(Be sure to come back tomorrow for the conclusion!)