Keep Your Sanity By Organizing Your Tax Records

Wednesday, September 5, 2012, AM | 3 Comments

You still have some months til next year tax season. But you seldom have time to organize your tax records unless you are determined to do so. The important thing is to be ready with all records when it’s time for you to do your taxes. The IRS strongly suggests organizing your tax records.

Devoting some time before the end of the year to putting your tax-related documents in order may make it easier for you to prepare your tax return when the filing season arrives.

Here are some things the IRS wants individuals and small business owners to know about record keeping.

Individuals

In most cases, keep records that support items on your tax return for at least three years after tax return has been filed. Examples include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed.

You should typically keep records relating to property at least three years after you’ve sold or otherwise disposed of the property. Examples include a home purchase or improvement, stocks and other investments, Individual Retirement Account transactions and rental property records.

Small Business Owners

Typically, keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Also, keep records documenting gross receipts, proof of purchases, expenses and assets.

Examples include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices, credit card charges and sales slips, Forms 1099-MISC, canceled checks, account statements, petty cash slips and real estate closing statements.

Electronic records can include databases, saved files, e-mails, instant messages, faxes and voice messages.

How to keep Records

Although the IRS generally does not require you to keep your records in any special manner, having a designated place for tax documents and receipts is a good idea.

It will make preparing your return easier, and it may also remind you of relevant transactions.

Good record keeping will also help you prepare a response if you receive an IRS notice or need to substantiate items on your return if you are selected for an audit.

Record keeping for Individuals

For more information on record keeping for individuals, check out Chapter 1, “Filing Information,” in IRS Publication 17, Your Federal Income Tax.

Record keeping for Small Businesses

Find small business record keeping information in IRS Publication 583, Starting a Business and Keeping Records.

Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

IRS record keeping

IRS has explained the need for record keeping in article or topic 305.

IRS Videos – explaining record Keeping

Also available are new video and audio files explaining record keeping requirements in detail, located at IRS Videos.

Source: TaxACT

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  1. 3 Responses to “Keep Your Sanity By Organizing Your Tax Records”

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