What Should You Keep?
Now that April 15 has come and gone – you may look at this time as an opportunity to clean up, clean out and get organized. We will be writing about tips to freshen or set up your in-home office to help you in your recordkeeping, but before we go there… let’s talk about your tax files first and what you need to keep.
Begin by gathering all of the documents and files that you pulled together to prepare your taxes.
One the questions we are asked is how long should I keep my tax records, and how much of the “backup” support documentation do I need to hold on to. In our earlier blogs we talk about the use of electronic media for scanning.
Even the IRS recognizes the benefit of scanning and storage devices – and as long as it meets IRS specs and allows you to retrieve the information in legible print in hard copy form it can cut down on mass of loose papers we collect over the year.
TIP 1: For those who like to keep “paper”, we recommend always making a copy of the thermal paper receipts you get in stores. The ink fades over time, so to be safe, we advise clients to make a photo copy. For more information, see our blog on “Keeping Business Records”.
TIP 2: Many in-home businesses use the plastic file storage containers that have a snap top available stores like Wal-Mart, Staples and Office Depot to store their important documents in the basement or garage.
TIP 3: A great way to label the outside of the storage box without permanently marking it up, is to put a piece of clear, wide, plastic tape across the front of the storage box and with a permanent marker, name the contents. For example : Tax Files For Year(s) 2010, 2011, 2012 and so on. If you need to change the label, just tear off the plastic tape and start over. Your storage boxes contents will be easily identifiable.
TIP 4: Think of how you want to file. Most have the current year in front, so when you file the next *current year* pull out the oldest year (in back) and shred it. Please make sure you shred the old documents rather than just throwing them away, so you don’t give any opportunity ID thieves.
Tip 5: Be sure to ask your tax preparer for a copy of any documentation they used in preparing your taxes.
Tip 6: Make sure you get parent-signed receipts of how much each parent paid you for the year. (Remember, if you are audited, the IRS will compare what you enter as payment from a parent, to what they entered. If there is a disconnect, it will be a red flag for a deeper probe.))
What Records To Keep With Your Tax Return
Child care providers should keep the following documentation with their tax returns for at least 3 years.
- All Receipts (if you have any questions about a receipt call us 619-589-8680.)
- Cancelled Checks
- Credit/Debit Card Statements
- Written Record (created by provider)
- Calendar notations (track non-reimbursed meals daily)
- Parent-signed receipts of how much they paid you for the year
In addition, here is a general list of records to save, (if applicable) along with a copy of your return:
- copies of all the W-2 forms your employer or employers sent you for the year
- all Form 1098s you received from financial institutions reporting the mortgage interest you paid during the year
- all 1099 forms you received reporting various payments to the IRS: this includes Form 1099-MISC reporting payments to you as an independent contractor; Form 1099-INT reporting interest you received from financial insinuations; and Form 1099-DIVs you received from payers of dividends
- Schedule K-1s showing your share of income or loss from partnerships, S corporations, trusts, and estates in which you have an interest
- statements you received from brokerage firms and mutual fund companies that are not 1099s
- Written acknowledgments from the charities involved of all the charitable contributions you made during the year
- records substantiating all of your business-related travel, entertainment, and car expenses–for example, a mileage log showing your business driving, your appointment book, and receipts
- canceled checks and credit card statements showing that you paid for expenses you’ve deducted on your return
- proof that you filed your return–if you filed electronically, this is the IRS email acknowledging that your e-filed return was been accepted for processing.
How Long Should You Keep Them?
Save all of your business records for at least 3 years. Many voluntarily decide to save their files longer.
Some say that you should keep your actual tax returns forever, because they can help when you need “history” applying for a mortgage or disability insurance or need a reminder to the value of other assets.
HAVE QUESTIONS? DON’T GUESS … CALL US AT 619-589-8680
And be sure to look for our upcoming blogs on time-saving home-office tips to organize your record keeping files and documentation.