Good Record-keeping is an Essential Element of Tax Planning

While it may seem early to be preparing for next year’s tax return, reviewing your record-keeping now will pay off when it comes time to file again. Here are some suggestions to help taxpayers keep good records.

● Develop a system that keeps important information together. Store paper documents in labeled folders or use a software program for electronic record-keeping.

● Throughout the year, add tax records to your files as you receive them. This includes your Economic Impact Payment and unemployment compensation documentation. Having records handy makes preparing a tax return next year easier.

● Notify the IRS if your address changes. You should also notify the Social Security Administration of a legal name change to avoid a delay in processing your tax return.

● Review your tax return to make sure you didn’t overlook any credits or deductions.

● Records that taxpayers should keep include receipts, canceled checks and other documents that support income.

● Keep records relating to property you dispose of or sell. Such records are necessary to determine the basis for figuring gains or losses.

● Keep records for three years from the date you filed the return. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.