I’ve got that receipt right here

By Ronda Addy

How many years now have you sworn you were going to keep better records? It seems like every time April 15 rolls around you scramble to get everything in order. Why not surprise everyone this year and have your records together and ready to go? By keeping good records all year long, you can save yourself some time and effort in completing your return. If you hire someone to prepare your return for you, organized records will make their job a lot easier and faster.

Basic records you should keep include W-2 forms, year-end statements from financial institutions and 1099 and 1098 forms. In addition to these, you must keep all records that may have an impact on your tax return, such as bills, receipts, invoices, mileage logs and proof of payment (cancelled checks).

The records you keep will be determined by the deductions you claim. If you pay or collect alimony, for example, you will need a copy of the divorce decree or separation agreement. If you claim a childcare credit, you will need the names, addresses and social security numbers or employer identification numbers of the caregivers. If you claim deductions for charitable contributions, you will need a receipt from the organization or an appraisal for large items. If you claim gambling winnings, you will need a record of where, when and how much was won.

Any deduction you claim on your return must be backed by some sort of documentation, just in case the Internal Revenue Service (IRS) decides to review your return further. Under normal circumstances, you must keep your tax records for three years. If you have business-related records, automobile expense records or capital asset records, you must keep these longer-as long as they are relevant for tax purposes or at least four years.

You don’t have to keep every little scrap of paper for your tax return. You do, however, need to pay attention to what you keep and make sure it documents your deductions.