Managing your tax records after you have filed

There are many reasons to keep household records, including keeping track of your expenses,maintaining records for insurance purposes or getting a loan. You should have the same approach to managing your tax records.

You should keep all documents that may have an impact on your federal tax return. Records you should keep include bills, credit card and other receipts; invoices; mileage logs; canceled, imaged or substitute checks; proof of payments;  and any other records to support deductions or credits you claim on your return.

Normally, you should keep these tax records for three years. It’s a good idea to keep some documents longer, such as  records relating to a home purchase or sale, stock transactions, IRA and business or rental property documentation. Keeping accurate records after you file your taxes will help you with documentation and substantiation if your tax return is selected for an audit.

You should also keep copies of your tax returns as part of your tax records. They can help you prepare future tax returns, and you will need them if you file an amended return. Copies of your returns and records can be helpful to your survivor or the executor, or administrator, of your estate. You may also need tax returns from previous years for loan applications, to estimate tax withholding or because records were destroyed in a natural disaster or fire. If your original tax returns were lost or destroyed, you can obtain copies or transcripts.  There are three options for obtaining your federal tax return information –online, by phone or by mail.

Keeping good records will help you explain any item come tax time and arrive at the correct amount of tax with a minimum amount of effort. If you don’t have records, you may have to spend time getting statements and receipts from various sources. If you cannot produce the correct documents, you may have to pay additional tax and be subject to interest and penalties.

For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals on IRS.gov or feel free to contact Tax On Wheels, LLC at 803 732-4288.