Gregory S. DuPont
Good Records Pay Off
Keeping accurate tax records can help you utilize all the tax breaks you may be entitled to and provide support if you are questioned by the Internal Revenue Service (IRS). Maintaining detailed and accurate records can help you “go the distance” if the IRS should challenge you. Taking the time to keep good records will give you peace of mind and may help you actually save taxes in the long run.
Items Often Left “Off the Record”
You may be quite diligent and conscientious in keeping track of things but there may be some areas you might have missed including in your records. To maintain the most complete records, keep track of the three following areas:
Charity—Instead of a cash contribution, write a check and keep the receipt. You need to obtain a written acknowledgment of any contributions of $250 or more from the charity receiving your contribution. A canceled check is not enough.
Travel--If you travel to receive medical care or to do volunteer work, keep a log of the miles traveled and what you spent on tolls and parking.
IRA—Keep records of nondeductible contributions to an Individual Retirement Account (IRA), keep the records of those contributions for at least six years after the due date for filing the tax return reporting the final withdrawal of funds from your IRA.
How Long Do I Have to Keep the Records?
It's a good idea to keep your income tax records and their supporting records for at least six years following their due date.
For example: Records concerning property (e.g., receipts for renovations, purchase agreements, etc.) should be held for at least six years following the due date for the tax return reporting the sale of your property.
These records are necessary in determining how much gain you should report when you sell your property. If you sell your home but defer the payment of your gain by buying another home, keep the records that relate to the home you sold for at least six years.