Frequently Asked Questions

Paying taxes is inevitable, but keeping good records ensures you only pay what you owe.  Accurate records are needed to document income,  expenses, gains, losses and other items that affect your tax liability.
 

How long should records be kept?  

Generally, keep all records that support your tax return for at least 7 years, as the IRS may review your return for up to three years after the due date.
 

Records for real estate, business equipment, and investments should be maintained for four years after the asset is disposed of.
 

Aways keep copies of your income tax returns, worksheets, itemized lists and supplementary documents indefinitely.  

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Income Documentation

Keep records showing the sources of all income including:

• W-2, W-2P, 1098 and 1099 forms
• Statements from investment companies.

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Deduction Documentation

For deductions retain: 

• Proof of expense (a receipt, bill, invoice) 
• Proof of payment (cancelled check, credit card slip, or bank statement)
   

Charitable contributions of $250.00 or more to the same charity at one time require a receipt.  You must have this before you file your taxes; a cancelled check is not enough.
 

If claiming the Child Care Credit, you must have the provider's name, address and Federal ID Number or Social Security Number.
 

If you pay or receive Alimony,  retain the separation agreement or divorce decree.

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Special Situations
 

Gambling winnings may be offset by gambling losses.  Keep a diary with: 

• Date 
• Type of activity
• Name of the establishment
• Amount won or lost

Casinos often provide activity statements if you use a plyer card.
 

Business expense records, for employees and self-employed individuals, are important both for taxes and managing profitability.  Keep diaries or logs frequently; receipts and details are easily forgotten later.
 

Automobile records must also be retained. Small business trips (bank, supply runs, and etc.) are easy to forget when not logged regularly.  Keep receipts for gas, maintenance, insurance, tolls and parking and record: 

• Total miles driven in the year
• Total business miles driven