How long should you keep your tax documents?

Your tax documents are very important documents that you may need to refer to way after the time you actually file your return. More importantly, the IRS may need to refer to these documents at some point in the future and you therefore need to make sure that you do not dispose of your tax documentation once you have filed your returns thinking that you will never need the documents again.

Whilst most people are aware that they need to keep their tax documents for a certain amount of time many are not sure how long they should keep them for. Of course, it is impractical to hoard your tax documents forever, as otherwise you may find that you can no longer move in your office of home due to the amount of folders, paperwork and documentation that you have!

However, it is important to keep your documents for at least a set minimum number of years and if at all possible for as long as you can – something you could do if you have some sort of storage facility available to you such as an unused garage where you could store old tax folders (although you must ensure that the facility you use is secure due to the personal information that your tax documentation can contain).

One thing to bear in mind when deciding how long to hang on to tax documents is that tax offices in different states will hang on to your documents for varying amounts of time. For example, in some states the IRS is able to carry out an audit within three years of your tax returns being filed, which means that after that period they will most likely get rid of the documents. In other states they may have four years from the date of the return to carry out an audit should they decide to do so. You should make sure that you find out what the timescales are in your state and hang on to your records for at least the same amount of time as the IRS so that you have something to refer to in the event of an audit.

However, another thing to consider is that if you get rid of your tax documentation once the IRS also gets rid of it there will be nothing to refer to in the event that you need the information for other purposes in the future, which is why some people like to hang on to their tax documents for as long as they are able to.

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to how to setup an umbrella company .

The IRS Provides Offshore Account Disclosure

As we complete the strenuous task of paying our incomes taxes for 2010, we have to deal with the unleashed financial monster i.e. IRS tax audits.

Many taxpayers do everything possible to try the nearly impossible feat of evading the burden of taxes by using the measures as per the Internal Revenue Code to dodge their tax burden. Thus, they cause financial problems and auditing issues for the government, which in turn has doubled the auditing of tax returns for the richest USA citizens this tax season.

IRS professionals have definitely pulled up their socks with audits being increased 8% for the richest USA citizens in 2010 over the past tax season. Also the data released by the Internal Revenue Service shows that IRS audits have increased from 10.6% to 18.4% for the taxpayers with gross incomes above $10 million. Even audits for taxed adults within the income range of $5 million and $10 million have seen audit increases from 7.5% to 11.6%, which is a 55% increase.

Offshore accounts and tax evasions are the new catch with Global High Wealth groups being established in 2010 for improved strategies for high magnitude capital individuals.
As per Doug Shulman, IRS commissioner, the federal agency is looking for leverage points through which many tax evaders can be caught. Two of them are financial institutions and evasion scheme promoters.

The initiative of an Offshore Voluntary Disclosure process for the native and non-native English speaking taxpayers, provides information in 8 different languages. For tax evader’s benefit, they can now disclose their offshore accounts and come clean with the taxing authority, since evading taxes is a criminal offense and largely against the US’ interest.

 

Ready for Tax Season? Learn the 3 Key Steps to Avoiding the Ire of the IRS

Just about everyone fears a tax audit from the IRS, but why? If you haven’t done anything wrong, there may really be no reason to fear such an inspection of your financial matters. Maybe this fear comes from the knowledge that we aren’t always sure we’re doing our taxes correctly in the first place. Maybe it comes from the fact that the tax code is so bloated with exceptions, exemptions, and deductions, that it leaves most us wondering if we indeed have a clue as to what we are doing when we fill in those simple looking tax forms that sit beside the huge instruction booklet. Maybe it’s just that as Americans, we don’t like having our privacy invaded by “the man” and don’t appreciate the fact that he’s checking up on us and our private financial affairs.

Whatever the reason, an audit is something the majority of us would prefer not to have to deal with. But mistakes, voluntary or not, can sometimes lead us in that direction. Here are three common tax mistakes that people often make and ways to avoid them.

Being and Staying Organized

Keeping all your pertinent financial and tax information together throughout the year isn’t necessarily easy. However, it can make a huge difference when it comes time to file. For many, one of the major mistakes when it comes to taxes is not having all the documentation they need at the end of the year easily at hand to make their filing process more efficient. Not having the proper documents can lead to mistakes and errors that could raise a red flag when your return gets to the state or federal level.

But being organized is only half the battle to avoiding this tax mistake. Staying organized after the fact can be important as well. Keeping your tax information together and in a location that is easy for you to find can help you if you need to reference information from a previous year or have to deal with an audit and need to provide documentation for your tax claims.

Deduction Fear

What if you happen to misplace certain documentation relating to your taxes such as a charitable donation receipt or similar item but have a legitimate claim to taking the item as a deduction or credit upon your taxes? This might lead to another common mistake — failure to take the deduction that you are eligible for anyway.

If you have legitimately made certain purchases or are eligible for certain credits or deductions, but may not have or can’t find the necessary documentation to prove it, this doesn’t necessarily mean you shouldn’t attempt to take the deduction. While it might be like playing a form of roulette — taking your chances of not being able to prove the item if you are audited — it’s not as if you are illegally claiming something you didn’t actually deserve, and your conscience should be clear even if the tax man gives you a slap on the wrist.

Knowing When to Call it Quits

Pride can be a dangerous thing, and when it comes to doing your own taxes, it can sometimes get in the way of a properly completed tax return. Frugality can also play into the mix of tax preparation mistakes, preferring cost savings by completing a tax return on your own as opposed to paying a professional to do it for you.

Saving a buck can be a great aspect of doing your taxes yourself, and the pride that comes with sealing that envelope and mailing a tax return you’ve completed yourself off to the IRS can a be a wonderful feeling, but these factors can also be common and dangerous mistakes in the realm of taxes. Knowing when to pack it in, swallow your pride and spend a buck to get a professional’s touch upon your tax return can save you time and even money by avoiding costly mistakes. Doing so might also provide you with peace of mind knowing that you haven’t missed any deductions and that you have a professional on your side should you indeed be audited.

Anastacio Mindiola is an accomplished attorney and business owner. His company helps home and business owners protest property taxes in Houston and the surrounding counties. For more information on how you can lower your property taxes visit http://www.republicpropertytax.com.