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Tax Documents you must Maintain

Guest post by: Krutika Chheda

Article Overview: What a great year this year has been for the tax payers in the US. Perhaps this may have been the best year for tax payers to get tax refund in recent history. We shall wait for the official figures from the US treasury, but from what we have seen at K&M Accounting and Tax Services in Charlotte, this year has been a bonanza of huge tax refunds for our clients. Now that the tax returns have been filed, what to do with all the paperwork and documents? This may be a good time to clean out the growing pile of tax and financial papers that clutters your home and office. Here's a list of what you need to keep

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Tax Documents you must Maintain

IRS Statute of Limitations - Three Year Rule

This rule limits the number of years that IRS can audit your tax returns. For assessment of additional taxes, the statute of limitation runs generally three years from the date you file your return. The idea behind this is that after a period of years, records are lost or misplaced and memory isn't as accurate as well. Once the statute of limitations has expired, the IRS can't go after you for additional taxes. However there are exceptions to this general three year rule:

· Failure to report all income (Remember IRS expects you report your global income) and the unreported amount being more than 25% of the income shown on the return, increases the limitation period to six years.

· Claiming loss from a worthless security increases the limitation period to seven years.

· If you file a 'fraudulent' return, or don't file at all, the limitations period never begins to run. The IRS can get you at any time.

Assuming that you've filed on time and paid what you should, you only need to keep your tax records for three years, but some records have to be kept longer than that.

Check List of Tax Documents you must Maintain

Employment, bank and brokerage statements: All W-2s, 1099s, brokerage and bank statements that prove your income must be maintained for at least three years.

Itemized Deduction expense documents: In case you itemized your deductions you will have to maintain all the expense receipts, mileage logs and other documentation that help substantiate your expenses. Remember, with IRS the rule during an audit is you prove it or loose it! At K&M Accounting and Tax Services we recommend our clients to maintain a scanned backup of their documents on our client portal in case you misplace or loose the originals.

Business records: Business records can become a nightmare to maintain. Since your income is not directly reported to the IRS as in the case of a salaried W2 income, the IRS is even more stringent when it comes to checking business records. If you have a sole proprietorship and have filed business loss on your personal return, make sure you maintain all possible income and expense records.

Tax returns: Keep copies of your tax returns for at least 3 years. Those of you that are in the midst of the immigration process may want to hold on to the tax returns at least until after your immigration case is completed. At K&M Accounting and Tax Service, we recommend our clients to hold on to the tax returns for at least 3 years after the immigration case is completed.

Social Security Records: Check with the Social Security Administration each year to confirm that your payments have been appropriately credited. If the Social Security Administration records are wrong, you will need the W-2 or copy of your Schedule C (if you are self employed) to prove the correct amounts. Don't dump those records until after you've validated those contributions.

Keep in mind this column and the articles published here are only meant to provide you with high level information about tax and business matters and in no way should you consider this as tax advice. Consult your tax advisor regarding your individual tax situation.

This Article provides only an overview to the complex Tax Laws. It is not exhaustive nor a substitute for Independent Tax Advice provided by a Tax Accountant or a Tax Attorney familiar with your case.

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Article Tags: accounting, bush administration, effective tax rate, home buyers, massive tax cuts, tax documents, tax incentives, tax payers, tax refund, tax refunds, tax returns, us treasury

About the Author: Krutika Chheda
RSS for Krutika's articles - Visit Krutika's website

Krutika is the founder of K&M Accounting and Tax Services L.L.C. She comes from a family of accountants and is a fourth generation Accountant. Krutika provides direct leadership and consultation to Small Business clients. Prior to starting KM Accountant, Krutika worked in multiple positions for 12 years in the US and India with public accounting, tax consulting, retail and education firms.
Charlotte Accounting Services:
We offer Accounting, Payroll and Tax Services to small businesses and individual professionals. Our combined 3-in-1 Accounting, Payroll and Tax package starts at $99 per month.
Charlotte Tax Service:
Our Charlotte office provides Federal and State Tax Retrun Preparation services for Small Businesses and Individuals in Charlotte Area. Federal and State Tax Services in Charlotte start at $349 for Small Businesses and $99 for Individuals.
Charlotte Payroll Services:
Our online payroll services start at $29 per month. Charlotte full service Payroll starts at $75 per month. Check out our Online Payroll Service in Charlotte.

Click here to visit Krutika's website
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More from Krutika Chheda
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