With the increasing number of paper-based and electronic records we all have, it can be hard to know what's necessary to keep, for how long and how to properly dispose of information when the time comes. Following these Record Retention Guidelines can help you
The responsibility to substantiate income, deductions, basis, and other items reported on your tax returns is known as the ‘burden of proof.’ You must be able to verify expenses to deduct them. Generally, taxpayers meet their burden of proof by having the receipts for and details of the expenses. You should keep adequate records to provide evidence to support your statements. Documentary evidence includes receipts, canceled checks, or bills. Additional details are required for travel, entertainment, gifts, and auto expenses. The information below reflects the statute of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the later of when the return was filed or its original due date (returns filed before the due date are treated as filed on the due date).
Nontax Purposes
When your records are no longer needed for tax purposes, do not discard them until you check to see if you should keep them longer for other purposes. For example, your insurance company or creditors may require you to keep them longer than the IRS does.
What to shred:
• Duplicates of receipts.
• Records that are unrelated to deductions and credits not claimed. One of the biggest offenders? Medical receipts when you don't claim the medical expenses deduction. You don't need to keep those receipts for tax purposes (however, you may need them for other reasons).
• Old tax returns. Some tax professionals recommend that you never throw out your old tax returns - even when the statute of limitations has already run - as proof that you have filed. Have a discussion with your tax professional to assess if your situation necessitates keeping returns longer than the suggested retention period.
• Paystubs. Check your paycheck stubs against your year-end statements, including you form W-2 and your annual Social Security statement. Make sure that they properly reflect your income, pre-tax deductions, employee benefits, etc. Once you've confirmed that they're correct, you do not need to save the stubs.
• Old records. If the statute of limitations has run, you can usually destroy tax-related records keeping in mind the above guidelines.Bear in mind, if records aren't needed for tax reasons, you may need them for other reasons. Safe. Secure. Offsite. Why a safe deposit box could be your best friend.A safe deposit box - usually located inside a bank - is used to store valuables. A safe deposit box is rented from the institution and can be accessed with keys, pin numbers or some other security passwords. Customers rely on the security of the building to protect the valuables placed inside. Keep in mind, only YOU can access your safe deposit box or those who you designate to be accompanied with you.Safe deposit boxes are the best places to keep items that are valuable. This includes jewelry, cash, stamp and coin collections and negotiable instruments like stock certificates and bonds. They are also good places to keep items that are not replaceable or that have sentimental value. A household inventory (videotaped or written), appraisals, listings of insurance policies, and credit card numbers should also be kept in a safe deposit box. Keep in mind, you do not want to put items that you need very frequently or at a moment’s notice.Examples of items of value:• Coin and stamp collections
• Negotiable investment instruments like bond and stock certificates
• JewelryExamples of items that are not easily replaced:
• Family heirlooms
• Photos
• Historical records
• Adoption papers
• Birth certificates
• Citizenship papers
• Military documents
• Divorce papers
Safe. Secure. At Home.
What not to keep in your safe deposit boxIt is important to remember that only you can open your safe deposit box without a court order. Items that others may need to obtain if you are not present should not be kept in your box. Use your safe deposit box regularly and keep a list of what it contains. Do not store cash in your safe deposit box. Original wills, powers of attorney, living trust documents, and other trust documents should not be in your safe deposit box. Insurance policies should be accessible and not kept in the box. We recommend these documents be scanned.What to keep in your in-home fireboxItems that should be safe but readily available:
• Vital back up data files from your PC, stored on a jump drive
• Passports
• Important contracts and business agreements
• Real estate deeds and mortgages
• Confidential records
• Copies of important financial records that you keep at home
• Copies of wills, living trust documents, powers of attorneys
Proof of Business Expenses
IF you have expenses for:
THEN you must keep records that show details of the following elements: Amount Date Place or Description Business Purpose and Business RelationshipTravel Cost of each separate expense for travel, lodging and meals. lncidental expenses may be totaled in reasonable categories such as taxis, daily meals for traveler, etc. Dates you left and returned for each trip and number of days spent on business Destination or area of you travel (name of city, town, or other designation). Purpose: Business purpose for the expense of the business benefit gained or expected to be gained.Entertainment Cost of each Date Name and Purpose: Business purpose separate expense. address of for the expense of the business Incidental expense location of place benefit gained or expected to such as taxis, of entertainment. be gained. telephones, etc., Type of entertain- For entertainment, the nature may be totaled on ment if not of the business discussion or a daily basis. otherwise apparactivity. If the entertainment ent. was directly before or after a business discussion: the date,(NOTE: Not deductible beginning in 2018) place, nature, and duration of the business discussion and the identities of the persons who took part in both the business discussion and the entertainment. Relationship: Occupations or other information (such as names, titles, or other designa- tions) about the recipients that shows their business relation- ship to you. For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal.Transportation Cost of each Date Your business Purpose: Business purpose for expense. destination. the expense. For car expense, the cost of the car and any improve- ment, the date you started using it for business, the mileage for each business use and the total miles for the year.
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