If you were ever subject to an IRS audit, would you be ready? Keeping thorough records that are well organized can help you prepare your tax return, but they also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.
This doesn’t mean you need to keep every single document that records or demonstrates a reason for a deduction or that you need to keep your records till the end of time. It’s a good idea to keep your ordinary supporting documents for three years.
There are certain transactions for which you are wise to keep documentation longer, e.g. records relating to a home purchase or sale, stock transactions, retirement account records, and business or rental real estate.
Employers are required to keep employment tax records from the later of four years from the date of payroll tax returns or the payment of employment taxes on payroll. As errors, and thereby audits, are much more common for this tax item, good records can be especially important here.
If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.
Some IRS publications are helpful in telling you what it is wise to keep:
Publication 552, Recordkeeping for Individuals, provides more detailed information on individual record keeping requirements.
Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses.
For up-to-date tax information visit TurboTax Online. Their support section is loaded with informative and accurate articles and a Free Tax Calculator you can use to help lower your taxes.




