Keeping Personal & Business Tax Records

This is an important task for everyone. The Ventura County Star describes the organization of tax records like exercise. You might not always have fun, but it is necessary.

A good recordkeeping structure is a solid start. The Ventura County Star recommends you make a list of your important assets and then organize your files in the same order. This provides for easy document retrieval. Ensuring that all your records are filed will help you at tax time.

The Internal Revenue Service (IRS) recommends individual filers keep all records that support the figures shown on your tax returns. This includes income information, such

Advertisement

as the Copy Cs, of all their Form W-2s, your Forms 1099, bank and brokerage statements, and any Forms K-1. Expense items, such as sales slips, invoices, receipts, and any proofs of payment should be saved. If you have a home, save your closing, purchase and sales invoices, all proofs of payment, and insurance records. Investment information, such as brokerage and mutual fund statements, as well as any Forms 1099 and 2439, should be saved.

It is recommended that you keep three years of tax information or viewed differently, two years from the date you paid the tax, whichever is later. With computerized filing becoming more prevalent, you should also keep your software with your tax information with electronic copies of your returns. This will allow you to reproduce a particular years’ return if necessary.

If you do not file a return, the IRS recommends you keep your tax records for all tax years. If you file a claim for a loss from worthless securities, the IRS recommends you keep seven years of tax records. If you do not report income that you should and it’s more than 25 percent of the gross income shown on your return, the IRS recommends you keep six years of records.

The IRS recommends that you safeguard your information in order to thwart all attempts of identity theft. An identity thief might use your Social Security Number to file a return so they can receive a fraudulent refund. Make your choice of a tax preparer carefully as well.

More information is available from the IRS in Publication 552, Bookkeeping for Individuals.

A solid bookkeeping system is necessary for your business too. Clearly showing your income and expenses is important but the law does not require any special kind of records. The IRS recommends that your bookkeeping systems should include a summary of your business transactions. Your company books should show your gross income, deductions, and credits. The main source of these entries might be the business checkbook. As with individual taxpayers, all information should support the amounts shown in company tax returns.

Gross receipts can be supported by cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips, and any Forms 1099-MISC, according to the IRS. Purchases can be documented with canceled checks, cash register tape receipts, credit card sales slips, and invoices. Canceled checks, cash register tapes, account statements, credit card sales slips, invoices, and petty cash receipts will support expense figures.

The IRS has resources for businesses available on its web site including: Businesses with Employees - Employment Tax Recordkeeping, What Kind of Records Should I Keep? and Starting a Business and Keeping Records.

You may like these other stories...

Savvy tax planning is about more than knowing what to write off. Just as essential is knowing when to take deductions. Choosing to stuff deductions into one tax year as opposed to another bears directly on how much winds up...
Tesco says it overstated profit forecastStanley Reed of the New York Times reported that Tesco, the large British grocery retailer, disclosed on Monday that it had overstated its expected half-year profit by about $400...
The IRS has announced the special per diem rates for 2014-15 that taxpayers can use for substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home. The new per diem rates...

Already a member? log in here.

Upcoming CPE Webinars

Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 21
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30
Many Excel users have a love-hate relationship with workbook links. For the uninitiated, workbook links allow you to connect one Microsoft Excel spreadsheet to other spreadsheets, Word documents, databases, and even web pages.