Tax Records – What You Should Keep And For How Long
Many taxpayers are confused about how long they should keep tax records. The term “tax records” refers to your tax returns and the documents that support the information in the returns. These documents can include receipts, bank statements, 1099s, etc. If you are one of the unlucky few to be audited, these records will be vital to fending off the IRS.
Tax Returns
To protect yourself from a nasty audit, you should keep all of your tax returns indefinitely. The IRS has been known to lose or misplace tax returns. While conspiracy advocates argue that this is evidence of a nefarious scheme, the simple fact is that the IRS receives millions of returns over a three-month period and lost returns are inevitable. So how do you protect yourself? You keep copies of every single tax return.
A quick word on the IRS e-file program. If you file your returns electronically, make sure you get copies from the company that filed your return. All such entities are required by law to provide you with paper copies.
Records Supporting Tax Returns
You should keep supporting tax records for a period of six years from the date the returns were actually filed. In general the IRS only has three years to audit you from the filing date. For example, if you filed your 2000 tax return on April 15, 2001, the IRS would have to start an audit by April 15, 2004. Keep in mind that if you filed an extension, the IRS will have three years from the date you submitted the return. As is always case with taxes, there are exceptions to this general time period.
If your tax return looks like the great American novel, the running of the three-year audit period may not save you. Failure to report more than 25% of your gross income gives the IRS an additional three years to pursue you. Using the previous example, the IRS would have until April 15, 2007 to audit your 2000 tax return.
Property Records – Get A Filing Cabinet
You may need to get a filing cabinet if you hold property for an extended period of time. For example, assume that you purchased a home in 1980 for $100,000 and made $50,000 in improvements over the years. You need to keep the purchase records, mortgage statements and receipts that relate to the improvements. When you sell the home, you will need the records to determine the tax consequences of the sale, to wit, your basis (original cost plus improvements) and profit. If the IRS decides to take a closer look at the reported profit, you will need to provide your tax records to support your claims. Once you actually sell the property, it is recommended that you keep all of the tax records for an additional six years.
Divorce
Make sure you keep copies of all of your financial documents, tax returns and supporting documents if you get divorced. You should also keep copies of all divorce agreements and court orders that cover property and financial issues. When couples divorce, the tax and credit consequences can be nightmarish. If you don’t keep records, you will have to ask your ex-spouse for them. Get the records now to avoid doubling your misery!
Hopefully, you will never need to show your tax records to the IRS. If you are one of the unlucky few that is audited, your tax records should keep your feet out of the fire.
Richard Chapo is with BusinessTaxRecovery.com – information on tax returns.
Instant tax service: a solid company name
At the present time the Instant Tax Service Company is the fourth largest tax preparer service company in the United States. This company was founded in 2000 by Fesum Ogbazion in Dayton Ohio. From their beginning just 9 years ago, they have grown to have over 1200 locations.
The funding for this company was from the sale of Mr. Ogbazion’s fist business venture. He started Instant Tax Refund Service Company in 1994. This was sold for a sizable profit to Jackson Hewitt in 1999 who were worried about competition.
This new venture into tax preparing has grown rapidly and with a good reputation. In 2007 over $40 million was reported in sales.
Like almost all Americans, Mr. Ogbazion was an immigrant that came to America with a dream in 1982. While still in accounting school he opened his first tax prepare office. A smart move by him was to locate this first office in an old H&R Block office that had closed. This helped him provide his services to over 600 clients in his very first year.
Today his company offers a full line of tax services to include not only the preparation of taxes but two different types of loans. The instant tax return loan and the refund anticipation loan for those that cannot wait for their refund checks.
This company is so confident that they will to the job right the first time that they offer a triple guarantee on their services. Instant Tax Service is a strong company with a promising future in the tax preparing and tax refund loan business.
It is critical to seek licensed council when dealing with income tax forms and related items. Research on the computer is a great approach for keeping your hourly lawyer bills low, but always check your findings with a licensed attorney or accountant before making any financial or business decisions. If you need more information about filing extension tips or other tax topics, visit us today at www.irs-help-tax.com.
Online Tax Preparation – preparing tax returns
Preparation of tax returns should be done very cautiously, because the tax payer is responsible for each and every word written on the tax return even though it is prepared by a professional. The preparer should be able to provide you with practical and convenient tips for tax saving.
You can find an efficient tax preparer online only if you put genuine efforts in searching for one.
Check while hiring tax preparer online
There are certain things that one should follow when hiring an individual or a firm for online tax preparation:
- Legally speaking, the professional preparer should sign the returns form in the preparer areas. He/she should furnish the identification number on the return. He or she should give a copy of the return to the tax payer.
- The preparer should be very accurate with filling in your details. Your personal information along with your registration number should be mentioned accurately.
- The tax preparer should be efficient in online accounting.
- Do not sign on blank tax returns form ever and do not use a pencil for signing as the signature can be easily erased and your signature replaced.
- You should present any notices and refund checks that you might have got from your attorney to the tax preparer for preparing the returns.
- Online bookkeeping is something that your tax preparer should be efficient in.
- The tax preparer should be adequately qualified and experienced for his/her job, because each and every word he or she writes in the return from is evaluated by the tax collection authorities, and there is every opportunity of the tax payer being penalized for terms that are vague or seem to be unreliable.
Online Tax Preparation Process
Tax preparation should be done with a lot of caution as each and every word mentioned in the tax returns form is the responsibility of the tax payer, even though it might be prepared by another person, a professional or a firm. The tax preparer should be well versed in his/her work. He/She should be adequately qualified and experienced to prepare the tax returns statement. He/She should fill out the form with clear and reliable statements and should sign the tax returns form wherever applicable.
He/She should fill in the areas on the tax return form where the preparer’s information is required. Details like identification number should be clearly furnished on the form and should be signed. The person should not leave any blank areas. The details of the tax payer presented on the returns form should be accurate. It is mandatory for furnishing the registration number of the tax payer. The tax preparer should be able to provide easy-to-implement tax saving tips, and he/she should be adept at online bookkeeping and accounting. Any notices and refund checks, if obtained from an attorney, should be furnished to the tax preparer. On the whole, preparation of tax return statements should be done in a very careful manner as mistakes might cost the tax payer a lot.
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