You likely already keep records of purchases and expenses in your daily life. Good record keeping will help you remember the various transactions you made during the year, which in turn, may make filing your return a less taxing experience.
Records help you document the deductions you claim or have claimed on your return. You will need this documentation should the IRS select your return for further review. Normally, tax records should be kept for at least three years, but some documents, such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property, should be kept longer.
In most cases, the IRS does not require you to keep records in any special manner. You can determine the tracking methods on your own. Generally, you should keep any and all documents that may have an effect on your federal return.
Basic Records that you should keep are broken down into four (4) main categories:
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Income |
Expenses |
Home |
Investments |
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Form(s) W-2 |
Sales Slips |
Closing Statements |
Brokerage Statements |
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Form(s) 1099 |
Invoices, Mileage Logs |
Purchases and Sales Invoices |
Mutual Fund Statements |
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Bank statements |
Receipts |
Proof of Payment |
Form(s) 1099 |
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Brokerage statements |
Canceled checks or other proof of payment |
Insurance Records |
Form(s)2439 |
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Form(s) K-1 |
Written communications from qualified charities |
Receipts for improvement cost |
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Good record keeping throughout the year saves you time and effort at tax time when organizing and completing your return.
For more information on what kinds of records to keep, visit the IRS website and refer to IRS Publication 583, Starting a Business and Keeping Records, which is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).