Tax Record Keeping – Traverse City Tax Services

What records does the IRS want you to keep? Is there any special way they should be organized? How long do you need to keep your records?

According to the www.IRS.gov website “Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.” This includes all of your receipts, bills, invoices (including credit card statements), proof of payment and canceled checks. If you have your own business you will have to meet additional record keeping requirements. Thankfully, in most cases the IRS does not require you to keep your records in any specific manner although it’s a good idea to be as organized as possible.

If you use your vehicle for business you will need to keep a mileage log as well. We recommend that you keep a small spiral bound notebook to keep in your center console, then every time you use your vehicle for business use, document the date, beginning and ending odometer reading and the purpose of the trip. With the current IRS rate at $.50 per mile, that can start to add up fast, but be careful if you take a mileage deduction and are audited but cannot produce accurate records the deduction will be disallowed.

Just in case they forgot to mention something the IRS also requires that you keep “Any other records to support deductions or credits you claim on your return.” This may include non-cash donations made to Goodwill for example. If you dropped off several bags of clothing and toys, you should write down each item that was included in the donation and a value for it. You may find that there’s more there than you would have imagined.

How long should you keep all of your records? Business owners should keep all records pertaining to their business for 4 years after the date that the tax is due or is paid, whichever is later. Non-business owners can typically dispose of receipts, bills, and proof of payment as well as records relating to property after 3 years, but there are some exceptions to this rule.

If you file a fraudulent return or do not file a return there is no limit to the time you are expected to keep your records. If you file a claim for refund/credit after you have filed your return the limit is an additional three years or two years after the tax is paid, whichever is longer. Finally if you file a claim for a loss due to worthless securities you must keep your records for seven years.

There are to numerous “exceptions to each rule” so before you throw away valuable documents, consult with your CPA or our team of qualified accountants. If you have any questions you can click here: Traverse City Tax Services and submit your question to Ron Harris of Harris Group Certified Public Accountants