Accurate record keeping is vital for your tax return examination. Your records are the original documents used to determine your income, and deductions. So how long are you required to hold on to these original documents? Are you fearful of destroying tax documents? Original documents typically should be held for three years. There are exceptions. When those exceptions apply, records should be held for six years when you under reported income by 25%. Hold documents indefinitely if you have not filed a return or you filed a fraudulent return. And hold employment tax records for four years after you filed or paid the tax.
Record Keeping
There is much to record keeping when you are burden to show proof during a tax audit. Yes, you are required to produce documents when you have to backup your claims on your tax return. Otherwise you will not receive credit for the deduction you claimed. Your record keeping will either make your tax audit experience tolerable or a living nightmare. We determine that outcome based on our willingness to be organized.
When you receive a notice of a change in your tax account, do not panic. You kept accurate records so have no fear of clarifying your position. Follow up with your tax preparer or hire a tax professional and he/she will be able to guide you through this process. We offer bookkeeping and tax representation services and would be glad to discuss your tax issues without a commitment. Contact us today if you need assistance organizing your tax receipts or accounting records.
Remember, when it comes to record keeping, the burden of proof is on the taxpayer.
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