Resources & FAQs

Keep detailed records of your income, expenses, and other information you report on your tax return. A good set of records can help you save money when you do your taxes and will be your trusty ally in case you are audited. There are several types of records that you should keep. Most experts believe it’s wise to keep most types of records for at least seven years, and some you should keep indefinitely.

What Do I Do If I Have Business Expenses For The Company I Work For?

If you work for someone else and spend your own money on company business, keep good records of your business expense receipts. You will need these records to either get a reimbursement from your employer or to prove business-related deductions that you take on your taxes only if they pay you as a contractor with cash or with a 1099NEC.

Do I Have To Report Income From Tips?

If you make tips from your job, the hand of the IRS reaches here too, and if you are ever audited, the IRS will be interested in records of how much you made in tips.

What Records Do I Keep If I Hire Domestic Workers?

It’s important to keep accurate information about who works for you, including nannies and housekeepers, when and where they worked for you, and how much you paid them for the work. If you control the work and is done in your house only, you might have to pay taxes and do payroll for them.

What Records Do I Keep If I Own Property?

If you own property, be particularly careful to keep receipts or some other proof of all your expenses, especially for repairs and improvements.

What Records Do I Need If I Travel For Business?

If you travel for business, keep good receipts and logs of all your travel expenses, including those for meals and entertainment. You will need this information whether you work for yourself or for someone else.

Do I Have To FIle Income Taxes Even If My Business Had No Income?

Yes! Specially if you have expenses, it is an LLC, a partnership, S Corp or a C Corp. If you are sole proprietor, there are probably expenses related to the business you will want to claim.

How Do I Close My Business?

It depends, if it is a C Corp, S Corp., or Partnership you must file a tax return where is marked that it is final one. If you have an LLC or sole proprietor with an EIN, you need to file a letter with the IRS telling them of the closing. If the business was also registered in a state, look up on their specific regulations as to how to close it with that specific state.

Record Keeping

What Types Of Records Do I Need to Keep?

Keep records of all your current year income and deductible expenses. These are the records that an auditor will ask for if the IRS selects you for an audit. Here’s a list of the kinds of tax records and receipts to keep that relate to your current year income and deductions:

• Income (wages, interest/dividends, etc.)
• Exemptions (cost of support)
• Medical expenses
• Taxes
• Interest
• Charitable contributions
• Childcare
• Business expenses
• Professional and union dues
• Uniforms and job supplies
• Education, if it is deductible for income taxes.
• Automobile, if you use your automobile for deductible activities, such as business or charity.
• Travel, if you travel for business and are able to deduct the costs on your tax return.

While you’re storing your current year’s income and expense records, be sure to keep your bank account and loan records too, even though you don’t report them on your tax return. If the IRS believes you’ve underreported your taxable income because your lifestyle appears to be more comfortable than your taxable income would allow, having these loan and bank records may be just the thing to save you.

How Long Should I Keep These Records?

Keep the records of your current year’s income and expenses for as long as you may be called upon to prove the income or deduction if you’re audited. For federal tax purposes, this is generally three years from the date you file your return (or the date it’s due, if that’s later), or two years from the date you actually pay the tax that’s due, if the date you pay the tax is later than the due date. IRS requirements for record keeping are as follows:

You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
You do not report income that you should report, and it is more than 25 percent of the gross income shown on your return; keep records for 6 years.
You file a fraudulent return; keep records indefinitely.
You do not file a return; keep records indefinitely.
You file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.
Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

One of the benefits of keeping your tax returns from year to year is that you can look at last year’s return while preparing this year’s. It’s a handy reference and reminds you of deductions you may have forgotten. Another reason to keep your old tax returns is that there may be information in an old return that you need later.

What Other Types of Tax Records Should I Keep?

You need to keep some other types of tax records and receipts because they tell you how much you paid for something that you may later sell. Keep the following types of records:

Records of capital assets, such as coin and antique collections, jewelry, stocks, and bonds.
Records regarding the purchase and improvements to your home.
Records regarding the purchase, maintenance, and improvements to your rental or investment property.

How long should I keep these records? You need to keep these records as long as you own the item, so you can prove the cost you use to figure your gain or loss when you sell the item.

Are There Any Non-Tax Records I Should Keep?

There are other records you should keep, even though they don’t appear to have any use for your tax returns. Here are a few examples:

Insurance policies, to show whether you were to be reimbursed in case you suffer a casualty or theft loss, have medical expenses, or have certain business losses.
Records of major purchases, in case you suffer a casualty or theft loss, contribute something of value to a charity or sell it.
Family records, such as marriage licenses, birth certificates, adoption papers, divorce agreements, in case you need to prove change in filing status or dependency exemption claims.
Certain records that give a history of your health and any medical procedures in case you need to prove that a certain medical expense was necessary.

These categories are the most universal and should cover most of your recordkeeping needs. Everyone’s needs are unique, however, and there may be other records that are important to you. Skimming through our Tax Library Index might highlight other categories that apply to you.

What Records Do I Need If I Contribute to Charity

If you donate to a charity, you must have receipts to prove your donation. Starting in 2007, contributions in cash or by check aren’t deductible at all unless you’re itemized, and they have to be substantiated by one of the following:

1. A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. Bank records may include: a canceled check, a bank or credit union statement or a credit card statement.

2. A receipt (or letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution.

3. Payroll deduction records. The payroll records must include a pay stub, Form W-2 or other document furnished by the employer that shows the date and the amount of the contribution, and a pledge card or other document prepared by or for the qualified organization that shows the name of the organization.

Besides deducting your cash and non-cash charitable donations, you can also deduct your mileage to and from charity work. If you deduct mileage for your charitable efforts, keep detailed records of how you figured your deduction.

What Kind of Record Keeping System Do I Need?

Unless you own or operate your own business, partnership, or S corporation, record keeping does not have to be fancy. Your record keeping system can be as casual as storing receipts in a box until the end of the year, then transferring the records, along with a copy of the tax return you file, to an envelope or file folder for longer storage. To make it easy on yourself, you might want to separate your records and receipts into categories, and file them in labeled envelopes or folders. It’s also helpful to keep each year’s records separate and clearly labeled. If you have your own business, or if you’re a partner in a partnership or an S corporation shareholder, you might find it valuable to hire a bookkeeper or accountant.