Question: How long should I keep my tax records?
Answer: Just how long to keep your records is a matter of judgment and a combination of state and federal statutes of limitation. The IRS can audit your return for up to three years after you file a return. However, if you omit more than 25% of your income from a return, that period increases to six years. To be safe, keep tax records for seven years after the filing date.
Question: What is the best way to assemble records for you to prepare my tax return?
Answer: First, don’t wait until the last minute to sort through your records. Set up a filing system early in the year and stay on top of your filing.
Second, realize that there’s not one particular system that works for everyone. If you use a tax organizer, you may want to set up your files in the same order, so you can easily locate the items you’ll need to complete it. Otherwise, you might want to use last year’s return as a guide, and organize your files in the same order they were reported on your prior-year income tax return.
Third, when you receive important tax documents, such as your W-2, 1099s, mortgage interest statements, retirement account statements, etc., verify that the information is accurate before filing the documents with your other records.
Question: What records do I need to keep for my business travel?
Answer: You need to keep receipts that support all your business travel expenses. For meal and entertainment expenses, you’ll also need to keep a record of the person you met with or entertained and the business purpose of that meeting.
If the primary purpose of a trip is business, you can deduct your travel and all business-related expenses, even though you enjoy a few personal days during your trip. Make sure you carefully document the way your time was spent to support your business deduction. You can’t deduct personal expenses.