Michael L. Green Tax & Financial: Taxes Are Taxing If You’re Disorganized
BY: MICHAEL L. GREEN
It never ceases to amaze me when a client walks into my office with a shoe box in hand, and canceled checks and receipts are spilling all over the floor. It’s 2013, and one would think that with all of the organizational tools at our finger tips today, we would be prepared for tax time. .
But frankly, some people are so resistant to paying taxes; their disorganization is their last bastion of rebellion. And some people just don’t understand why it’s important to keep tax records. Maintaining good records can make filing your return a lot easier, and it will help you remember transactions you made during the year. According to the Internal Revenue Service, keeping good records helps you:
- Identify sources of income. You may receive money or property from a variety of sources. Your records can identify the sources of your income. You need this information to separate business from non-business income, and taxable from nontaxable income.
Don't miss a thing. Get breaking Santa Clarita news alerts delivered right to your inbox.
- Keep track of expenses. You may forget an expense unless you record it when it occurs. Your records help identify expenses that you can claim as a deduction. This helps you determine if you can itemize deductions on your tax return.
- Keep track of the basis of property. You need to keep records that show the basis of your property. This includes the original cost or other bases of the property and any improvements you made.
- Prepare tax returns. There’s no getting around it; you need records to prepare your tax return. Good records help you or your tax preparer to file quickly and accurately.
- Support items reported on tax returns. You must keep records in case the IRS has a question about an item on your return.
Here are a few things the IRS wants you to know about recordkeeping.
Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:
- Credit card and other receipts
- Mileage logs
- Canceled, imaged or substitute checks or any other proof of payment
- Any other records to support deductions or credits you claim on your return
- You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:
- A home purchase or improvement
- Stocks and other investments
- Individual retirement arrangement transactions
- Rental-property records
You can use your checkbook to keep a record of your income and expenses. In your checkbook, you should record amounts, sources of deposits and types of expenses. You also need to keep documents, such as receipts and sales slips that can help prove a deduction. If you use an electronic storage system for the purpose of maintaining tax books and records, all requirements that are applicable to hard-copy books and records still apply.
Copies of tax returns — it’s important you keep copies of your tax returns as part of your tax records. They can help you prepare future tax returns, and you will need them if you file an amended return. Copies of your returns and other records can be helpful to your survivor or the executor or administrator of your estate.
I have added a couple of worksheets that will help you, help your tax preparer, prepare your taxes. They include a Tax Appointment worksheet, Making the Most of Non-Cash Charitable Donations worksheet, a Non-cash Contribution worksheet, and the 2012 California and Federal Tax Rate Schedules.
Michael Green of Michael L. Green Tax and Financial is an enrolled agent and Certified Financial Planner in Valencia. Mr. Green can be reached by calling (661) 257-4111.
Do you have a news tip? Call us at (661) 298-1220, Or drop us a line at firstname.lastname@example.org