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Records That IRS Wants You To Have by Charlie Seitz When it comes to organizing the records you'll need to prepare your tax return, it's best to start now. You'll reduce the stress that comes with the last minute rush to get your tax records together. And you'll probably remember deductions now that you may have long forgotten next March. Keeping good records can make filing your return a lot easier and if you do it now--before year end--you may remember transactions that become fuzzy after the hectic pace of the holidays. Such well-organized records also make it easier to answer questions if your return is audited or to prepare a response if you receive an IRS or state notice. In most cases, IRS does not require you to keep records in any special manner. Generally speaking, you should keep all documents that may have an impact on your income tax return. You should keep these records for at least four years after the year for which you are filing the return. For example, if we're talking about your 2009 return, you should keep all backup pertaining to that return through the end of 2013. You should keep the following records to support deductions that you take on your tax returns: 1. Bills; 2. Credit card and other receipts; 3. Invoices; 4. Mileage logs; 5. Canceled, imaged, or substitute checks or any other proof of payment; 6. Any other records to support deductions or credits you claim on the return. Concerning the retention of records relating to property that you sold, you should generally follow the same four year rule outlined above. However, it's a really good idea to keep all records from the time you buy property until four years after you sell it. Examples of such property include: 1. A home purchase or improvement; 2. Stocks and other investments; 3. Individual Retirement Arrangement transactions; 4. 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 payroll tax becomes due or is paid, whichever is later. Examples of other important documents that you, the business owner, should keep include: 1. Proof of gross receipts, like cash register tapes, bank deposit slips, receipt books, etc.; 2. Evidence showing that you bought items you are deducting, like copies of checks, credit card statements, etc.; 3. Documents to verify that you purchased assets you are depreciating. For more information about record keeping, check out IRS Publications 552, Record keeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). As always, consult with your tax adviser to make sure that you are keeping the records you need to prove the income you've earned and the deductions you've taken in your tax return. Charlie Seitz has prepared over 10,000 tax returns at latest count. His ezine, Terrific Tax Tips, gives taxpayers tools they need to intelligently reduce the taxes they pay. He also provides online tax preparation software for people who do their own taxes. All of the profit from Taxpert Online is donated to organizations that feed children. Find out more at: -> http://www.taxpertonline.com

 

 

 

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