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Tax 101 Series: Keeping Good Records Can Save You Time, Stress, and Even Money!

01Dec2016

Tax 101 Series: Keeping Good Records Can Save You Time, Stress, and Even Money!

Every year you probably find yourself scrambling to find your tax documents, and you’re not alone! It can be hard to keep up with everything you need when it’s time to file your taxes. But did you know that keeping good records will reduce your tax-time stress and can even save you money? Many people are overlooking valuable tax deductions that can reduce their taxable income. Check out Tax 101: To Itemize or Not to Itemize, That is the Question  for more information about deductions you may be missing.

The IRS does not require you to keep your records in any special way. If they choose to audit your tax return, having records that were kept or created contemporaneously with the income or expense item at issue will go a long way toward helping to resolve any issues in an efficient way. It is generally important to keep the following:

  • Government confirmation of your return and your refund
  • Records of charitable donations, including receipts
  • Large or medical dental bills
  • Forms from your job showing income you’ve made (typically a W-2)
  • Credit card and other receipts
  • Mileage logs
  • Cancelled, imaged, or substitute checks or any other proof of payment

If you own property, you will also need to keep track of the following for at least three years after you sell the property:

  • Any documents related to the purchase or improvement of your home
  • 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 employment taxes are paid or due, whichever is later. These records include:

  • Gross receipts: cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
  • Proof of purchases: cancelled 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 cancelled checks.

If you plan to take deductions for any business-related expenses it is important to keep track of why the expense was incurred, and the name of the client or potential client if that is relevant. Without all of this information, it is likely that the IRS will disallow your claimed business expense.

If you have any questions about what you should or should not be keeping, please call Global Law PLLC at (703) 712-8000.

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  • 1 Dec, 2016
  • Karina Torres
  • 0 Comments
  • Business Expenses, Small Business Owners, Tax Audits, Tax Deductions,

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