"Record Keeping" from IRS

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Good Recordkeeping – Keeping Good Records Reduces Stress at Tax Time

This is Kim Lawson.

I’m talking with Monica Baker about good recordkeeping habits.

Q1.Monica, should taxpayers wait until the end of the year to prepare for next filing season?

A1.No.

This is 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.

Q2.What kind of business records should I keep?

A2.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.

Categories of important documents business owners should keep include:

  • First, gross receipts such as: cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
  • Second, proof of purchases, for instance: canceled checks, cash register tape receipts, credit card sales slips and invoices
  • Third, expense documents, which include: canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
  • Finally, cocuments to verify your assets, like: purchase and sales invoices, real estate closing statements and canceled checks

Q3.What other kinds of records should I keep?

A3.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

Taxpayers should usually keep the records supporting items on their tax returns for at least three years.

This includes records to support deductions or credits you claim on your return such as invoices, receipts, mileage logs and canceled checks or any other proof of payment.

Q4.What else does the IRS wants us to know about recordkeeping?

A4.Keeping well-organized records helps you 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.

Q5.Where can a taxpayer find more information on recordkeeping?

A5.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 website: IRS.gov. or by calling 800-TAX-FORM (800-829-3676).

Thank you, Monica.

KIM:I’ve been talking with Monica Baker of the IRS.

This is Kim Lawson.

Source: IRS

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