It is never too early for California taxpayers to begin preparing for next year’s tax season. The more that one is able to accomplish today, the less work one will have to do to beat the filing deadline come April 2013. Keeping accurate, detailed and well-organized records is one way to ensure that springtime is not filled with stress.
Of course, there are always questions surrounding what items you should keep in anticipation of filing a return, and how long you should retain them after sending that return to the IRS or California Franchise Tax Board. No one wants his or her filing cabinet bursting with paper, so the Internal Revenue Service has provided a tax tip that touches on some of the basics regarding what records are important to keep for tax time.
The documents taxpayers will want to file away depend on whether one owns a business or not. For small business owners, records that show a business’s assets, expenses, purchases and gross receipts should be retained. Owners should also hold on to their employment tax records for a minimum of four years from the date on which the business was required to pay the tax or the date on which it actually paid the tax, whichever one was later.
For individual taxpayers, the list of documents will be different. Documentation that can support deductions and credits can be very important. For example, if one takes a deduction for mileage traveled for business, it is important to keep a precise log of the distance one has covered during the tax year.
Individual taxpayers will also want to keep other records that back up the numbers on their tax returns. These can include receipts, credit card statements, bills and checks. Taxpayers should generally retain these documents for three years after they file the return to which they relate.
Source: The Community News, “IRS gives tips on organizing tax records,” Aug. 8, 2012.
• Accurate record keeping can also be helpful in the event the IRS initiates an audit of your tax return. If you would like more information on my firm, please visit my Irvine IRS tax audit page.