This is great. This is awesome. We have all been given a reprieve this year for filing our taxes. July 15, 2020, is now the big deadline.
Here are some things you should know that will help you get organized for filing your tax return.
1. It's always a good idea to organize your files before you prepare your taxes. However, if starting with a box of assorted papers and receipts is your system, that's okay. We can start right there. Take that box and separate your bank statements, medical bills, utility bills, mortgage statements, 1099's and W2's, insurance statements, child support documents, and credit card statements, or any other documents that support your income and expenses, from your receipts. See the IRS for instructions on what you can deduct to help you gather the correct information.
2. Calculate. This means take your stacks and add them up. Total your income, your household bills, your vehicle payments, your tips, your business entertainment, and again, check your tax instructions to see what you can deduct to be sure you have all your totals compiled.
3. Next, get your forms. I file online but some use accountants or complete them manually. You can obtain forms from IRS.gov or find out where to pick up your paper forms. Your accountant or tax preparer should have these readily available. If you are filing manually get two sets, one for notes and preliminary calculations and one for your completed form. Be sure to check for accuracy before you write up the final form. If you owe, don't forget to send a check. There are also instructions for extensions on the IRS site.
4. Once you have filed your return, now is the time to put your documents in a safe place. Keep only the documents that relate to what you have claimed. There is no need to keep any other receipts or statements if they are not associated with your taxes. If in doubt, ask your tax preparer or the IRS. Mark the year on your file folder or file box and store away.
5. Now, here's the best tip of all. I am always asked, "How long should I keep my taxes?" Well the IRS has that information right on their website. but to help you out, here's what they say.
"The length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you must keep your records that support an item of income, deduction, or credit shown on your tax return until the period of limitations for that tax return runs out.
The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax. The information below reflects the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.
Note: Keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return.
Period of Limitations that apply to income tax returns
Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
Keep records indefinitely if you do not file a return.
Keep records indefinitely if you file a fraudulent return.
Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
The following questions should be applied to each record as you decide whether to keep a document or throw it away.
Are the records connected to property?
Generally, keep records relating to property until the period of limitations expires for the year in which you dispose of the property. You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.
If you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property.
What should I do with my records for nontax purposes?
When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. For example, your insurance company or creditors may require you to keep them longer than the IRS does."
I hope this makes filing your taxes just a little easier. Also, check with your tax accountant for specific instructions related to your specific filing needs.
It's as simple as that!