Tax Record Keeping: Taxpayer Requirements

Taxpayers are required to keep accurate , permanent records and books used to determine types of income, gains, expenses, looses, along with other items that may affect one?s income liability for the year.
Record retention showing all sources of income you received, including all W-2 forms, 1099 and 1098 forms and end year statements of compensation received from financial institutions, banks and brokers.
If you have a deductible item you are claiming on your return, retention of a document or receipt proving the expense actually existed and method of payment( such as a canceled check, credit card receipt or bank statement itemizing your checks ) used during eligible tax year. Items paid during tax year are deductible; items not paid during tax year are not.If you are claiming employee business expenses, the recordkeeping for each type of expense applies as if you were a business owner.
If you paid alimony or received it, you should keep a copy of the separation agreement or divorce decree. (Always)
If you are claiming the child care credit, your records must include the name, address, and Social Security number or employer identification number of all caregivers. You will need this information in completing IRS form 2441.
If you claim deductions for charitable contributions, you may need to get a receipt from the organization to which you made the donation, or an appraisal of the item. It is best to have a receipt on official letterhead, signed and dated.
If you have gambling winnings, you should be keeping a diary of your winnings and losses that includes the date, type of activity, and location of the establishment, the names of other people who were present, and the amount you won or lost. Business-related records, automobile expense records and capital asset records require special bookkeeping rules covered in my next post.
It is a must to retain all of these records as long as they may be relevant for any tax purpose, or for a minimum of four years.
Tax record keeping is a requirement and definitely makes life easier in case of audit. (been there, done that)
If you have a question use my quest book @ TaxMart with your question.
?An informed taxpayer saves both money and time.?
Larrie

TaxMart

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