Many companies meet tax season unprepared. If you find yourself stressing to scour up records and financials at tax time, your system may be in need of reform. Maintaining good records year-round not only helps you keep track of the transactions you made throughout the year, but it also aids in reducing the stress of tax filing. Well-organized records also prepares you to answer questions should your return be selected for examination.
The IRS has developed a list of the few things that could help you properly manage your records. For the most part, the IRS does not require you to keep records in any special manner. You should, however, keep record of any and all documents that many impact your federal tax return.
Individual taxpayers should keep records of the following information for at least three years:
- Bills
- Credit card and other receipts
- Invoices
- Mileage logs
- Canceled, imaged or substitute checks or any proof of payment
- Any other records to support deductions or credits you plan to claim on your return
Records related to property should be maintained for at least three years after you sell or dispose of the property. The following are examples of property records you should keep:
- A home purchase or improvement
- Stocks and other investments
- Individual Retirement Arrangement transactions
- Rental property records
Small business owners must keep additional records in preparation for tax time. You must keep all employment tax records for at least four years after the tax becomes due or is paid. Business owners should save and file the following documents:
- Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099 – MISC
- Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
- Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
- Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks
Ultimately, maintaining good records year-round will greatly reduce the stress associated with tax time. Whether you are an individual tax payer or a small business owner, keeping these tips in mind will ensure your success during tax time.
For additional tips to keep tax time stress at bay, review our list of solutions to tax time problems.