Record Keeping for Taxes

Taxes are complex and multilayered; they require attention from experienced and knowledgeable professionals who are on the cutting edge of complex tax law matters. We focus on providing tax services to closely held companies, including corporations, partnerships and limited liability companies, and to individuals, trusts and charitable organizations. We are proactive in our approach toward tax developments and strategies that may lead to tax deferrals and minimizing current and future tax obligations.

We prepare the entire spectrum of business tax returns from corporate, partnership and limited liability returns to local returns including payroll, sales tax, city business licenses and personal property forms. We are proficient in multi-state filing and can also assist you with international tax matters. We often prepare the income tax returns of a company, its owners and its executives. Being the tax preparer for all involved is advantageous for information gathering for the individual returns and integration of tax planning.

In addition to the above, we are also experts of fiduciary returns, private foundation returns, estate returns, (Form 706,) charitable remainder unitrusts, and returns for public charities.

What to keep and how long to keep it.

Tax records should be kept on a year-round basis, not hastily assembled just for your annual tax appointment. Without tax records, you can lose valuable deductions by forgetting them on your tax return, or you may have unsubstantiated items disallowed if you are audited.

Generally, returns can be audited for up to three years after filing. However, the IRS may audit for up to six years if there is substantial unreported income. The three and six year limits start with the filing of a tax return; if no return is filed, the time limit never starts to run.

Which records are important?

  • Records of income received.
  • Expense items, especially work-related.
  • Home improvements, sales, and refinances (for homes with profit potential of $250,000 or more).
  • Investment purchases and sales information.
  • The documents for inherited property.
  • Medical expenses.
  • Charitable contributions (records vary with value of gift).
  • Interested and taxes paid.
  • Records on non-deductible IRA contributions.

How long should records be kept?

Just how long you should keep records is partly a matter of judgment and a combination of state and federal statutes of limitations. Federal tax returns can be audited for up to three years after filing (six years if underreported income is involved). It is a good idea to keep most records for six years after the return filing date.

There are some records worth keeping permanently, partly due to long-term needs and partly because they take up very little room. Consider permanently retaining a copy of each year’s tax return. Contracts, real estate buy/sell records, and records of property improvements should be retained for seven years after the property is sold.

If you are in business, your record requirements are more extensive. Please call us; we will be happy to assist you with a system of record retention for your business.

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