We are in the tax "off-season," but that doesn't mean that we can afford to stop thinking and talking about taxes.
Utilize this down time to get organized and make sure you have a plan to keep your records. Very simply, the IRS could ask you to prove anything that you claim you purchased, sold, or gave away. Your money moves like a current and the IRS wants to track it.
Typical frauds include claiming to little of your income and exaggerated expenses. Sometimes, these errors causing fraudulent returns, are simple mistakes caused by being unorganized.
It is imperative to realize that some documents need to be kept while others do not. We recognize the importance of a shredder and encourage you to use it. However, not all documents need to be shredded and not all documents need to be kept, forever at least.
If you have electronic access to bank records then it is acceptable to shred bank statements immediately. You should request Electronic Statements from your bank to eliminate the chance of identity theft.
For monthly bills like electricity or gas, you only need to keep those long enough to prove that your payment amount had been received from the previous month. Once the company has that information, then there isn't a need to keep the previous month bill.
As far as check stubs are concerned, you can keep those until you can compare them against your W2.
You will also want to keep records of all donations. Churches and other qualified charities typically send an end of the year statement that will qualify for proving record of your donations.
For more information, check out Record Keeping for Individuals, Publication 552, from the IRS. Also within this publication is a table that will tell you how long documents need to be kept.
An easier solution is to enroll in Liberty Expense Tracking and store everything in an easy-to-use website. Liberty Expense Tracking is designed to make documenting your expenses so simple anyone can do it, no manual required. LET provides everything you need to easily track, preserve and summarize all of your business expenses so you get the most benefit at tax time, allowing you to be more productive and save money, too.
Forget about opening the shoebox at tax time, and spending endless hours sorting, categorizing and totaling your receipts, many of which may have been lost or faded. It only takes seconds to enter your expense information into your Liberty Expense Tracking account. When tax time comes along print off your expense report and bring it in to the nearest Liberty Tax Service office.
Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.