Adequately documenting your income and expenses is essential for correct analysis and calculation of the taxes you owe. Throwing receipts into a desk drawer or relying upon memory is a sure way to understate deductions and overpay taxes.
Monthly statements from banks, brokers, mutual fund managers and others who provide financial information should be filed for easy retrieval and safely stored.
Remember, the IRS can go back a minimum of three years in a tax audit, and even six years in some serious violation cases, from the date a return is filed. It's prudent to not only maintain good records to file correctly, but to keep them for at least six years after the filing date in case of an audit.
This is part of an occasional series of tax tips from Tom Brunberg, head of Wade Financial Group’s Year Round Tax Planning Service.