Gathering together all of the records you need to prepare a tax return can be very tedious. However, it is essential that you gather the right information so that your return can be prepared properly. Maintaining records is critical so you’ll be prepared if ever selected for an audit. Because good recordkeeping is your first line of defense against many penalties we would like to offer a few helpful hints.

What are the basics? While your records must be accurate, the IRS generally does not require any particular form of recordkeeping. A cancelled check is a very good record of having paid a particular expense. Keep your canceled checks that relate to any items that you will need or think you will need to prepare your return.

You also should keep receipts, sales slips, and invoices that refer to any item on your return. Once your return has been prepared and items have, in fact, been included in the return as deductions or in some form or another, it is imperative that you have records supporting the claimed tax treatment.

Another question that arises with respect to recordkeeping is how long you need to keep the records. Generally the period is three years from the date you file your income tax return or, if later, two years from the time you pay the tax. If you file your return before the due date, the IRS gets to measure the three-year period from the actual due date. Sometimes, the IRS has six years. There is no limit for the IRS to bring an action against someone who has filed a false or fraudulent return. In some cases, you should keep records longer than the regular limitations period. For example, you should permanently keep records of your basis in property.

If you have any questions about the recordkeeping matters touched upon here or have specific recordkeeping questions, please give us a call.