You may not be thinking about your tax return right now, but summer is a
great time to start planning for next year. Organized records not only make
preparing your return easier, but may also remind you of relevant transactions,
help you prepare a response if you receive an IRS notice, or substantiate items
on your return if you are selected for an audit.
Here are a few things you should know about recordkeeping.
1. In most cases, the IRS does not require you to keep records in any
special manner. Generally, you should keep any and all documents that may have
an impact on your federal tax return. It’s a good idea to have a designated
place for tax documents and receipts.
2. 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
3. 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