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Without
tax records, you can lose valuable deductions by forgetting to list
expenses on your return having unsubstantiated items disallowed
if you're audited.
Generally, returns can be audited up to three years after filing.
However, if income is under reported 25% or more, the Internal Revenue
Service can collect underpaid taxes up to six years later. In of
words, you need good records to verify what you report on your tax
returns.
Your accountant will need less time to review y records, if organized
& hence lower tax preparation fees.
The tax law requires all businesses to keep records to support the
gross income, deductions, and credits claimed on their income tax
returns.
All businesses should have a permanent set of books which summarize
individual deposits, disbursements and items of adjustment needed
to prove the basis (cost) of depreciable The general rule is that
supporting documents should be retained at least until the statue
limitations for a tax year has passed.
The supporting documents the IRS reviews include bank statements,
cancelled checks, payroll record, invoices, and the like.
If you fail to retain adequate records to support the items claimed
on your returns, the IRS has authority to reconstruct your income
.
Whatever method the IRS uses, you have the burden of proof if you
dispute their estimate
Important
Records :
- Record
of income received
- Expense
items, especially work related expenses.
- Home
improvements, sales and refinances –
- Investment
purchases and sales information
- The
basis of inherited property
- Loan
proceeds
- Medical
expenses
- Charitable
contributions
- Interest
and taxes paid
- Records
on nondeductible IRA contributions
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