Last Updated on November 6, 2023 by editorial team
Keeping your financial records in check is very important in your everyday life. It is like keeping our money safe in a locker. Similarly, one such important financial record is the 1099 form which shows different kinds of income apart from our salary.
As the world is getting digital, the way we keep our records is also changing. Now, instead of using big filing cabinets with heaps of paper, we use tiny computers to store all our data. This post will guide you on how you can keep your 1099 form records safe such that you can find them easily whenever required.
Here’s a tip: Using a check stub maker can also simplify managing your financial documents, as it allows you to create and organize pay stubs digitally with ease.
What is Electronic Storage
Electronic storage is a smart method to keep your data in a digital format. It is way better than the old days when papers would fill up shelves and lockers. But now the situation has completely changed because you can now carry a big library of documents on your small devices. Here are some ways to store data digitally or electronically.
Hard Drives and SSDs:- These small boxes can hold a lot of data and they sit inside your computer and keep your data safe.
USB Drives:- You can keep these small devices in your pocket along with your house keys and wallet. They hold different amounts of data depending on their size.
Cloud Storage:- You can say that it is the latest technology. This is a big invisible library where you can store data on online servers. You can send your data there and call it back when you need it. Places like Google Drive and Dropbox are like different types of Cloud Storage
CDs and DVDs:- Though they are not popular now, you must have seen these disks. You need a special reader like a DVD player to see what is inside.
Benefits of Electronic Storage
Here I have listed some popular and common benefits of electronic storage devices.
Save Money:- The first thing you will notice is that you are saving money. It is because you do not need to buy cabinets or lockers to keep your important papers. Also, you won’t need to buy paper or print forms. You just need a small space on your computer/storage devices or cloud to keep your records safe.
Better Security:- When you keep your records on paper anyone who finds them can easily read them. But if you keep it electronically, you can lock it with a password. If you want to check your records then only you, or someone you trust with the password, can see your records. Many electronic storage devices come with default lock systems to keep your data safe.
Easy Access Anytime:- Imagine you need to check some old records late at night and if it’s on paper then you will have to search through piles of it. But if it’s on your computer or online you just need to do a few clicks and you can get the details. You can look at your records anytime you want, from anywhere. All you need is the right password and an internet connection if it’s stored online.
Choosing the Right Electronic Storage
When you decide to store your 1099 form records digitally, the next step is to choose where to keep them. There are mainly two places you can keep your data:-
Cloud Storage:- As I already said, Cloud is like a big online locker where you can keep your data and it is flexible as you can access it from anywhere, anytime. You need an internet connection to access cloud storage services like Google Drive or Dropbox. The latest data shows that more people are liking cloud storage for its ease. But, one thing to check is whether the cloud service follows the rules of the IRS and keeps your data safe as per the laws.
On-Premises Storage:– On-premises storage is when you keep your data on your own computer or server (like having a personal locker). You have full control over your data. But it can be a bit costly because you need to buy equipment and the required software for the setup. Also, you need to take care of the security of your data yourself on a time-to-time basis.
Organizing Your Electronic Records
Whether your records are online or offline, organizing them is very important. It will be a real headache if you try to find a name. That is why, organizing your electronic records is very very important
Folder Structure:- Create empty folders to keep your 1099 forms. You could have folders for different tax years or different types of income. For example, a folder for 2022, another for 2021, and so on. Inside them, you can have folders for contractor payments, rent income, and others as per your need.
Metadata and Tags:- Metadata is like a small note on a file telling what is inside and tags are like labels. Both help in finding files fast. For example, you can tag a record with “Contractor Payments” and when you search with this tag, all related files will show up.
Naming Conventions:- Keep the names of your files clear and simple. Include the date, type of income, or vendor name in the file name. If you do this way then just by looking at the name, you will have an idea of what is inside.
Preparing for Audits
Now, your 1099 form records are not just for you to see. Sometimes, others like tax officers may need to check them. This is called an audit.
Keep a Log:- Every time someone looks at or changes your 1099 form records, make a note of it. Write who, when, and what as this log helps if there is any question about your records later.
Test Your System:- Check if you can find and open your 1099 form records easily (Do it once in a while). This way, when the tax officer asks for any record, you can give it fast and without worry.
Know the Rules:- Make sure you know what the IRS rules say about keeping and showing your 1099 form records. So it’s good to check the latest updates once in a while as the rules may change.
Backing Up Your Records
It’s not just enough to keep your records in one place. What if something goes wrong? Like a computer crash or a hacker attack? That’s where backing up comes into play:-
Regular Backups:- Make it a habit to back up your 1099 form records regularly. You can set a reminder for yourself. I would recommend you to follow the latest advice is to follow the 3-2-1 rule. It means keeping 3 total copies of your data, 2 of which are on different media or platforms, and 1 of which is stored offsite, like in cloud storage.
Separate Storage:- As you got the glimpse from the previous point, don’t keep your backup in the same place as the original data. If something happens to one then the other stays safe. Like if you have your original data on your computer, keep the backup on an external hard drive or cloud storage.
Automated Backups:- Nowadays, you can set up automated backups. This means your data gets copied to a safe place without you having to do it each time.
Demerits of Electronic Storage
While there are many advantages to storing your 1099 form records electronically, there are also some disadvantages. Knowing these will help you prepare better.
Technical Issues: Machines can sometimes fail such as your computer may stop working, or your internet may become slow. This can sometimes make it difficult to access your electronic records.
Cost: Keeping your records digitally will incur some expense. You may need to buy a good computer or pay for cloud storage. Also remember, these costs can add up over time.
Privacy Concerns: When your records are online, there is always a risk that other people may be attempting to access them. Even with good security, there is always a risk of hackers trying to break into it.
Storing your 1099 form records in digital or electronic form is a good step and also they are simple and safe. After reading these posts, you now know where to keep your data, how to keep it safe, and how to show it when needed. It’s a big task but broken down into small steps in this post to make it easy for you.
The goal is to keep your financial records like your 1099 forms in a place where you can find them fast and know they are safe. So take that step now into this digital way of keeping your 1099 form records. Share this post with others who also need to keep their financial records safe. And don’t forget, the digital world is here to make our lives easy and smooth. So you too also take most benefits of it.