How to keep good tax records

[Adapted from the “IRS GuideWire,” 16 July 2008]

In a tax emergency, would you be ready? Well–organized records not only help you prepare your tax return, but they also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.

Fortunately, you don’t have to keep all tax records around forever. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.

If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.

If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.

Publication 552, Recordkeeping for Individuals, provides more detailed information on individual record keeping requirements.

Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses.

These publications can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Actually, there is a wealth of free tax information on the IRS Web site, IRS.gov. It’s not just about recordkeeping. Individuals and businesses can find answers to almost any question about federal taxes on the web site. Helpful links found at the top of the home page will take you directly to topics centered on Individuals, Businesses, Charities and Non-Profits, Government Entities, Tax Professionals, the Retirement Plan Community and Tax Exempt Bonds.

In addition to the latest news coming from the IRS, the homepage can lead you to statistics, news releases and tax tips, local IRS offices, the Taxpayer Advocate Service, and thousands of IRS forms and publications. Frequently asked questions and answers are available or you can use two separate search icons: one by keyword and one by answering “I need to . . .”

Why wait? Summertime is a great time to visit IRS.gov. Remember that for the genuine IRS Web site be sure to use .gov. Don’t be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Links:

• IRS Publication 552, Recordkeeping for Individuals (PDF)
• IRS Publication 583, Starting a Business and Keeping Records (PDF)
• IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses (PDF)

New to SmallBizSurvival.com? Take the Guided Tour. Like what you see? Get our updates.

• About the Author
• Latest Posts

About Maesz

Glenna Mae Hendricks. She is an entrepreneur and income tax consultant, so we get lots of good tax tips from her. She is an oenophile (“look that up in your Funk and Wagnall’s,” she says), and a wine enjoyment teacher/guide who also writes wine notes at the Allen’s Retail Liquors site. Her political thoughts (and occasional outbursts of domesticity) appear at Old Feminist and Wild-eyed Liberal.

• Four Things to Know about Taxes and Starting a Business - November 14, 2017
• You probably should be making estimated tax payments to the IRS - November 7, 2017
• 2015 Standard Mileage Rates from the IRS - December 23, 2014
• Deducting your home office – webinar Wednesday - September 8, 2014
• Webinars on hiring independent contractors and avoiding common tax mistakes - April 30, 2014
• IRS? There’s an app for that - February 12, 2014
• IRS Tax Calendar for Small Business and Self-Employed - December 31, 2013
• 2014 Standard Mileage Rates for Business, Medical and Moving Announced - December 7, 2013
• Where can you find answers on the Affordable Care Act? The IRS - August 21, 2013
• Avoiding the Top Tax Mistakes - June 13, 2013