Store Household Files in a Secure Location

March 23, 2009
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To help ward off potential compliance problems, store original tax credit household files in a secure, waterproof, and fireproof location. Protect household files as you would other valuable property, because if the files are lost or damaged, the owner’s tax credits are on the line.

Although it is also good management practice to make two copies of each household file and store them in two separate places, the IRS will want to see the original files—not the copies—when it does an audit.

It is especially important to securely store household files from the first year of the credit period. These files are essential in proving that your site met the minimum requirements of the tax credit program in the first year that the owner claimed credits. If you cannot prove that the site met the minimum requirements during the first year, the site will not qualify for tax credits. Your state housing agency audits these files during the compliance period to make sure that you met this initial requirement. And the IRS may audit you up to 21 years after the first year of claiming credits.

If a fire or a flood destroys the only set of household files you have, you cannot prove that you met the initial program requirements. Even if this happens in year 21, the owner can lose all the credits ever claimed on the site.

For more voluminous files, consider copying them onto a CD-ROM.