Keeping Good Tax Records

You can avoid headaches at tax time by keeping a file of your receipts and other records throughout the year. Good record-keeping during the year will make filing your return easier for you or the person you hire to prepare your taxes. The best time to start is on January 1. But you can begin keeping 2008 records on April 15 when you file your 2007 tax return.

Files help you keep records of the deductions you can claim on your return. That can add to the amount you get back from your taxes. You also need this documentation if the IRS wants to audit (review) your return. Most tax records should be kept for three years. However, some documents, such as records of home purchase or sale, investments, IRAs and business or rental property, should be kept longer.

In most cases, the IRS does not require you to keep records in any special order. Find an easy to manage place to keep your records. A metal file cabinet is best. But you can use a cardboard file box, a shoe box, file folders, or even a large envelope. Keep any and all documents that may have an impact on your federal tax return. These include:
• Bills
• Credit card and other receipts
• Invoices
• Last year’s tax return
• Medical and dental expenses
• Donations to religious groups or charities
• Canceled checks or any other proof of payment
• Receipts for energy-saving home improvements
• Any other records to support deductions or credits you claim on your return.

Good record-keeping during the year saves you time and effort at tax time.
Contact the IRS at 1-800-829-3676 for more information.