Maintaining good records now can make filing your return a lot easier and it will help you remember transactions you made during the year.

Keeping well-organized records also ensures you can answer questions if your return is selected for examination.  This will also help you and your PRO-TAX professional to prepare a response if you receive an IRS notice. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, any and all documents that may have an impact on your federal tax return should be kept.

Three-Year Rule

An individual should usually keep for at least three years anything that supports deduction or credit items on their tax return such as bills, credit card statements, invoices, cancelled checks or other proofs of purchase.  Mileage logs are very important records for those who claim a deduction for mileage.

In addition, if you have sold or otherwise disposed of property, keep for three years anything to do with a home purchase, home improvements or rental property records.  In addition, keep anything related to stock or other investment transactions, or those dealing with IRAs.

Four-Year Records

Small business owners must keep all employment tax records for at least four years after the tax becomes due or is paid, whichever is later.

Here are examples of other important documents business owners should keep:

• Gross receipts: Cash register tapes, bank deposit slips, electronic transfer statements,  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, diary records of business meals, mileage logs
• Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks or electronic transfer statements
• Car and truck operating and maintaining expenses

For more information about recordkeeping, check out IRS Publications 552, Recordkeeping for Individuals,583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. As always, your PRO TAX offices are here to help!