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...

As mentioned in today’s “Bramwell’s Lunch Beat” via an article from the USA Today, a new report from the Treasury Inspector General for Tax Administration (TIGTA) found that the IRS doled out $2.8...
London Stock Exchange switches auditing to EYThe London Stock Exchange will drop PwC as its auditor and replace it with EY after completion of the audit for the year ending March 2014, Harriet Agnew of the Financial Times...
With tax season in the past, it's time to think about the tax implications of decisions your clients may be making about their homes in 2014. The rules are complicated and because of the huge amounts involved, the...

Upcoming CPE Webinars

Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.
May 1
This material focuses on the principles of accounting for non-profit organizations’ expenses. It will include discussions of functional expense categories, accounting for functional expenses and allocations of joint costs.