Keep ev­ery­thing

Sav­ing re­ceipts, records will aid in fil­ing

New York Daily News - - YOUR MONEY - John Gre­gory Gre­gory is a tax prac­ti­tioner and founder of 1040Re­turn.com.

IF YOU’RE FEEL­ING stressed yet again this year about tax sea­son, it means there’s a lot of room for im­prove­ment in how you pre­pare your re­turns.

It’s time to de­velop a sim­ple sys­tem for do­ing your taxes so that the process will be a sur­pris­ingly easy task for you next year — take a cou­ple of hours ev­ery week to or­ga­nize and up­date your records so that the next tax sea­son will be sig­nif­i­cantly eas­ier and worry free. This is es­pe­cially true for tax­pay­ers who take a lot of de­duc­tions or write off busi­ness ex­penses. Here’s how to save your­self the pain and worry by han­dling your taxes bit by bit all year long. Main­tain good records. Hav­ing the req­ui­site doc­u­ments in place to sup­port and val­i­date your trans­ac­tions is very im­por­tant, es­pe­cially if you are tak­ing de­duc­tions on your in­come — the IRS might want to check if the de­duc­tions you claim are gen­uine.

The agency does not man­date any spe­cific method of main­tain­ing records. You can hold hand­writ­ten pa­pers and hard copies or soft copies of all the nec­es­sary doc­u­ments.

You may want to scan hand­writ­ten re­ceipts and in­voices, name them se­quen­tially and store them on your com­puter. But if you are main­tain­ing records elec­tron­i­cally, dis­card­ing the phys­i­cal doc­u­ments is still not a wise thing to do. Bal­ance your check­ing ac­count. Hav­ing an up-to-date check­ing ac­count to re­ceive and make pay­ments is a great way to ac­count for ev­ery dol­lar that comes in and out of your busi­ness or house­hold. Keep auto and en­ter­tain­ment logs. If you use a car for busi­ness pur­poses, you should main­tain a daily log of how many miles you travel. Keep a small bin­der in the car’s glove box and get into the habit of jot­ting down the de­tails — date, mileage and busi­ness pur­pose — in the log be­fore you step out of the car.

This goes for en­ter­tain­ment, too. Ex­penses in­curred when en­ter­tain­ing clients in the course of your busi­ness, in­clud­ing meals, are de­ductible. Keep old tax re­turns. The IRS does not man­date the num­ber of years for which you should main­tain copies of tax re­turns. It can con­duct au­dits and go as far back in time as it wants if it sus­pects fraud.

But it is rec­om­mended you re­tain copies of tax re­turns and sup­port­ing doc­u­ments for six years. It will help you prove that your de­duc­tions are jus­ti­fi­able and taxes are cor­rectly paid should you re­ceive an au­dit no­tice from the IRS. Save home-re­lated records and re­ceipts. You should have a copy of the set­tle­ment sheet when you buy a new home since it is the proof of the price you paid for it. If you sell your home, the gains you made are sub­ject to tax.

If you have spent on home im­prove­ment, keep­ing a log of the ex­penses will help you avoid tax bites.

Also keep records of any ca­su­alty losses that your house suf­fers. You can deduct them as well un­less they are re­im­bursed by the in­sur­ance com­pany.

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