I'm sorry to tell you that is a an oversimplification and especially for documenting expenses as a company/freelancer it's kind of worse.
Last time I checked if you want to follow the tax law to the word you're not allowed to change the medium:
If an invoice came as a paper copy (e.g. by snail mail), this paper copy is the original. If you scan it the digital version isn't.
If an invoice came as a digital document (e.g. a PDF by email), this digital document is the original - a printed version of that digital document isn't.
So if a tax inspector asks for "originals" it's technically almost impossible to provide them in the sense of the law. If even a tax inspector would care is another question.
And yes, they care about those rules and that you provide "originals" according to that definition - in particular that you didn't modify digital documents in any way. You can (and should) comply with that and there are service providers to help if you are to small to set that up yourself.
I admit that my last paragraph was kind of hyperbole, but I never heard (at least from other freelancers) of a tax inspector which wasn't happy with either everything printed or everything digital. I guess they really start to care if they suspect something fishy.
I think more than a few of these projects are started and/or maintained by Germans due to the astonishing number of documents received - e.g., paperless-ng appears to have been done by a German, although neither the original Paperless nor Paperless NGX immediately appear to be.
Getting all my invoices from last year to prepare taxes is now just a simple query in the paperless UI, the result would be about 95% digital and 5% physical documents, probably. Of course I could do all that old-school using filesystem folders, but having all my documents indexed and searchable in a single place was definitely worth the (small) effort of setting it all up and keep it running.
I just add all purchases/sales right when they happen in my accounting app and attach the invoice PDF. Then when I have to file taxes, I export the correct numbers.
Are you doing your bookkeeping in Excel or something?
Also it was just meant as an example, paperless is generally useful (to me) in situations where I need to access somehow related documents, like traveling and such, or searching my documents for some information. As I said, there are other systems and ways to do this, but for me this is the one that stuck.
That's the Marie Kondo approach. I feel the same way. I'm not sure that digitizing everything really removes clutter. It removes the physical paper, yes. But not the mental overhead of knowing that you have all those documents.
Some people obviously have a need to retain documents for things like business expenses that will be deducted from income. I don't have any of that. I get my W2s and 1099s and do my taxes. I throw all that in one folder and put it in a box in the closet. That's good enough for my purposes; I see no need to expend the time and mental energy necessary to scan and tag (even automatically) every receipt, utility bill, and other statements I receive. Why? I'll never look at them again.
I recently purchased a house. As part of the process, I needed to apply for a mortgage. The bank wanted a statement from my employer about my income from them, along with my last 2 complete years tax documents.
The bank had an inquiry. My employer had said my salary + bonus was X, but in the first of these two years, my tax documents said my income from my employer that year was 2.5X. The extra 1.5X was due to the employer being bought out and some change of control terms in the RSUs causing immediate payout of what would normally have been paid out over 4 years. Since I kept the documents of the RSU terms and the payslips, I could provide these to the bank to clear the matter up.
Notably, had I not kept my own copy of these documents, I could not have gone back to my employer for new copies. Due to the change of control, they had changed payroll vendors, and had eventually terminated the contract with the old vendor, so I could not have gotten a payslip from 1.5 years ago. Similarly, in the move to the new owner's HR system, the company had lost many of their records of agreements with employee's, including contracts etc., so it's not clear they would still have the terms of the RSUs, especially since the change of control payout rendered this a "completed" transaction. And later events made it clear that they did not have, e.g. a copy of my employment contract.
Similarly, if I ever had had a dispute over the terms of those contracts - if I hadn't kept a copy of the contract, and the company definitely hadn't kept theirs, any dispute would have been my word against theirs.
In a real contract dispute your copy of a contact from your documents isn't notably different in the eyes of the court than one from your employer. They're both notarized and if there's a dispute between them there is established processes. Aside from some titles or etc., historical filing ownership is typically relegated to the document originators.
But when I was a freelancer I used a document scanning system provided by my bookkeeper. It worked similar to this open source thing, scan to PDF, automatic OCR and classification. Needed it because many invoices still arrived on paper, and receipts for restaurants etc I usually took a picture to upload.
Some correspondences take years and only add a mailing every few months. You would like to have a thread-like view -- as in an electronic mail. That is the strength of document management systems.
Of course, I still quickly download my year-end bank/salary/mortgage statements and cross-verify the tax departments numbers. The whole process takes at most a few hours.
IME Germany has significantly more hard-copy requirements.
But technically you're expected to keep the documents at least until you receive the "definitieve aanslag" and if you're nitpicking I think there is a 7 year term for the tax services to come back on your filed taxes and change things or demand proof.
Practically that doesn't happen if you accepted their pre-filled numbers and they match your employers. But if you're a freelancer or other non-standard case I would keep digital copies for a few years just to be sure.
Ah, interesting. I just assumed my situation never triggered it.
Seriously, a couple cases of “sorry, I don’t have proof to back up that tax deduction” or “hey, here’s the receipt proving that our TV is still covered by warranty!” make it all worthwhile.
I've only added documents I've received this year (plus a couple of dozen documents going further back), and I've got ~250 in there, with a total of ~2.5m words (although I think word-count is a fuzzy concept in German).
I've posted a top level comment in more detail, but yeah, it's helpful to me.
The other end of the spectrum in USA is filling with the 1040-EZ which is like a 3-4 document process.
And there are some important documents you want to keep longer than that -- birth certificates, wedding certificates, death certificates, documentation around the house you buy, documentation around your car, any personal health documents you keep, etc....
So, you'll want to have electronic copies of all that, and ideally backed up to an offsite location, in case you have a fire in your house. If you at least have electronic copies of those documents, even if you lose the original document in a fire, there's a good chance you can use that information to get new certified copies sent to you by the appropriate city/state government in question.
So, yeah, this can become a thing that needs to be carefully monitored and managed over the decades.
But yeah, then there are for example the bank account contract updates which come by physical mail only.
> expense notes (...) I throw everything away once it's handled.
Don't know about your location, but I need to keep the tax related documents for 5 years in case of an audit.
services.paperless.enable = true;
We had this ridiculous money-making scheme from the Federal Government a few years back called "Robodebt", which basically amounted to sending demands to pay back welfare money that they claim was incorrectly claimed ... long after the retention period for the paperwork. Conveniently they declined to show their working for the so-called incorrect claims.
Most people didn't keep their timesheets and records, and then couldn't prove they weren't overpaid, and were supposedly liable for the "debt".
Some people comitted suicide over it.
If you had your records, you probably wouldn't have lost any sleep over it, much less your life.