Keeping Good Records

You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. 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’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for 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. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return:

~ Bills
~ Credit card and other receipts
~ Invoices
~ Mileage logs
~ Cancelled, imaged or substitute checks or any other proof of payment
~ Any other records to support deductions or credits you claim on your return

Good record-keeping throughout the year saves you time and effort at tax time when organizing and completing your return. If you hire a paid professional to complete your return, the records you have kept will assist the preparer in quickly and accurately completing your return.

For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available on IRS.gov or by calling (800) 829-3676. You may also contact us directly to inquire about what specific records you should keep based on your particular tax matter.

IRS Publication 552

Save Money, Cut Taxes with an IRA, a Roth IRA or Investing in Higher Education

A traditional IRA is a domestic trust or custodial account that can be established by an individual in order to save money for retirement on a tax-deferred basis. And adding to the appeal of an IRA is that some contributions may also be deducted from your taxable income.

A traditional IRA is an extremely versatile and simple way to save for retirement. It is often used by those with no other tax-favored way to save for retirement. A traditional IRA also serves as the funding method for retirement plans, like SEPs and SIMPLEs, used by small business owners and the self-employed. The beauty of an IRA is it is an extremely easy way to save for retirement, with virtually every type of financial institution standing ready, willing, and able to set one up for you.

A Roth individual retirement account (IRA) is essentially a non-deductible traditional IRA. Roth IRAs are also generally subject to the same rules as traditional IRAs. Despite the many similarities, however, Roth IRAs do have a number of unique features and requirements such as: (1) Qualified distributions from a Roth IRA are not includible in income and, therefore, tax-free. (2) Contributions can be made to your Roth IRA regardless of your age. (3) There are no required minimum distributions that must be made from a Roth IRA. (4) Eligibility to contribute to a Roth IRA is subject to special limits.

If you have children or grandchildren, you no doubt have at least thought about how you were going to pay for their education. With private school and college costs rising at an alarming rate, worrying about the kids’ education is probably a more accurate description of what you’re doing. You can look into opening a 529 College Savings Plan where up to $4,000 of your contributions will help reduce your State Tax Liability (if your State allows it). Or you can look into a Coverdell Education Savings Account (CESA). Then there’s the educational credits offered on the Federal and State level in some cases.