Wednesday, April 18, 2007

Tax record keeping tips

Hopefully you have done your taxes already, and if you haven’t, stop reading blogs and go do them! Once you’re done, you should keep records of what you have filed. Bankrate.com lists some good tips on what you need to file and what you don’t.



There are limits
When it comes to tax-related documents, you should hang on to records that help you identify sources of income, keep track of expenses, determine the value of property, prepare tax returns or support claims made on those returns. However, common sense -- as well as storage space -- should be your guide. …


Use it or lose it
This means 1040 forms and any accompanying tax schedules, along with the documents supporting the return, such as W-2s, 1099 miscellaneous income statements and receipts or canceled checks verifying tax-deductible expenses. …


Housekeeping -- and selling -- records
For most taxpayers, the biggest asset -- and potential tax bill -- is a home.


While the tax rules for home sales have changed in recent years, meaning sale profits don't automatically face IRS charges, any paperwork relating to a residence should be kept for as long as the home is owned. …


Taking stock of investments
Fast on the heels of home sales as tax triggers (and record-keeping headaches) are stock transactions. …


Retirement record requirements
And then there are all those retirement savings plans, with all those different rules.


Contributions to traditional IRAs often are tax-deferred. But sometimes already-taxed money goes into these accounts, too. What happens to your taxes when you reach 59½ and start taking money out?


That depends in large part on your record keeping.


Business considerations
If you operate a small business, from a moonlighting job to a small operation with several employees, dealing with records becomes a bit more complex. But even then, it doesn't have to overwhelm you.


Pick a system, any system
Once you've identified critical records, the next step is to decide how to keep the data. Electronic bill paying can help keep track of your financial and tax life, but so can a plain old check register, as long as expenditures are entered faithfully.


It doesn't matter if it's a filing cabinet, cardboard boxes or a complex computer program. The key, says organizational expert Barbara Hemphill, is find your record keeping comfort level, pick a system and stick with it. …


Tax record keeping tips at Bankrate.com

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