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How to Keep Good Records
More IRS Summer Tax Tips
Although most people won’t be filing their tax returns for several months, the dog days of summer are actually a great time to start planning for the tax filing season by ensuring your records are organized. Whether you are an individual taxpayer or a business owner, you can avoid headaches at tax time with good records because they will help you remember transactions you made during the year.
Here are a few things the IRS wants you to know about recordkeeping.
Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you are billed for additional tax. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.
Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:
Bills
Credit card and other receipts
Invoices
Mileage logs
Canceled, imaged or substitute checks or any other proof of payment
Any other records to support deductions or credits you claim on your return
You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:
A home purchase or improvement
Stocks and other investments
Individual Retirement Arrangement transactions
Rental property records
If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:
Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks
For more information about recordkeeping, check out IRS Publications 552, Recordkeeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
IRS Publication 552, Recordkeeping for Individuals (PDF)
IRS Publication 583, Starting a Business and Keeping Records (PDF)
IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses (PDF)
How Long Should I Keep My Accounting and Tax Records?
By Stacie Clifford Kitts, CPA
Do you know how long you should keep your accounting and tax records? If the anwer is -no- you’re not alone.
The following information published by IRS GuideWire will help you know just how long to keep those important documents.
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In a tax emergency, would you be ready? Well–organized records not only help you prepare your tax return, but they also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.
Fortunately, you don’t have to keep all tax records around forever. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.
If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.
Publication 552, Recordkeeping for Individuals, provides more detailed information on individual record keeping requirements.
Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses.
These publications can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).
Actually, there is a wealth of free tax information on the IRS Web site, IRS.gov. It’s not just about recordkeeping. Individuals and businesses can find answers to almost any question about federal taxes on the web site. Helpful links found at the top of the home page will take you directly to topics centered on Individuals, Businesses, Charities and Non-Profits, Government Entities, Tax Professionals, the Retirement Plan Community and Tax Exempt Bonds.
In addition to the latest news coming from the IRS, the homepage can lead you to statistics, news releases and tax tips, local IRS offices, the Taxpayer Advocate Service, and thousands of IRS forms and publications. Frequently asked questions and answers are available or you can use two separate search icons: one by keyword and one by answering “I need to . . .”
Remember that for the genuine IRS Web site be sure to use .gov. Don’t be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is http://www.irs.gov/.
Links:
IRS Publication 552, Recordkeeping for Individuals (PDF)
IRS Publication 583, Starting a Business and Keeping Records (PDF)
IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses (PDF)
Stacie's Tax Stuff 