The following guest post was provided by TaxDebtHelp.com.
While most taxpayers have their current taxes in mind right now, it is also the perfect time to begin organizing for next year’s tax filing.
Keeping good tax records throughout the year can greatly reduce the burden you’ll face at tax time and avoid any tax-related stress caused by missing documentation. If you are prepared when tax season rolls around, you can feel much more confident in preparing your return, filing it in a timely fashion and minimize the money you owe or maximize the money you will receive in your return.
While the IRS does not provide guidelines on how to organize or document your tax information, they do make it clear about what records you will need to save and what information needs to be documented.
First, everyone who plans to file a tax return should keep and organize throughout the entire tax year any financial, travel, job search and education-related records. Most documents should be saved for at least three years. These include:
- Copies of bills that you plan to claim on your return.
- Credit card receipts and all other relevent receipts.
- Any invoices that will be claimed.
- Accurate mileage logs that are deduction-eligible.
- Any pertinent receipts or cancelled checks.
- Any other documents that will help to verify the deductions you plan to make.
Second, all property ownership records should be kept while you still own that property, and for a minimum of three years after you dispose of that property. This includes:
- All documents related to the purchase or sale of your home.
- Receipts/documentation of any home improvements.
- Information on any stocks or other investments.
- Any transactions related to retirement.
- All records for rental properties that you own.
If you own a small business you will also need to keep and organize the following documentation for a minimum of four years:
- Gross Receipts: invoices, cancelled checks and credit card or cash receipts.
- Expense Documents: account statements, invoices, credit card or cash receipts, copies of cancelled checks and any other documentation you feel is pertinent.
- Any Documents Verifying Company-Owned Assets: company-owned real estate, computer, laptop and software purchases, etc.
Now that you are aware of everything that you will need to present at tax time, you can imagine how stressful it will be if you have to scramble to find everything in a short period of time. The best way to avoid that chaos is to start immediately at the beginning of the year and come up with a system that will help you organize all ofthe information that you will need to keep track of.
One of the most efficient ways to keep track of your tax documents is to use a spreadsheet that you update regularly; at least once each month. If you decide to go this route, be sure to keep an envelope with receipts and other documentation to back up your claims. Another good method is to use file folders, setting up separate folders for different items. A more simple solution for people who do not have a lot of records is to keep a shoe box, adding any receipts or documents to it throughout the year.
Regardless of the system you use to manage your tax records, having everything all in one place is the key to an easy tax return. As long as you have kept track of everything listed above and can find it easily you will be prepared for a simple – and possibly equitable – filing come tax season.