Archive for July, 2008

Keeping good tax records

Justin Dagna | July 20, 2008 9:50 pm

This tax tip comes from the IRS and provides an excellent summary of the types of records every taxpayer should keep. Business owners, in particular, need to understand the value of their records. That shoebox full of receipts probably has $10,000 in tax savings inside.

From the IRS Tax Tips  2008-05: Keeping Good Tax Records

In a tax emergency, would you be ready? Well–organized records not only help you prepare your tax return, but they also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.

Fortunately, you don’t have to keep all tax records around forever. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.

If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.

If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.

Publication 552, Recordkeeping for Individuals, provides more detailed information on individual record keeping requirements.

Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses.

These publications can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

One additional tip: consider digitizing your records. I have met several clients who had their receipts destroyed by flood, fire and loss while moving across country. The IRS will accept scanned images of receipts provided that they are stored in a non-editable format. A 200 dpi grayscale GIF or JPG image stored on CD-R or DVD-R is acceptable for this purpose. You can easily fit an entire decade’s worth of records on a single DVD-R. Make three copies: keep one at home, one at the office, and one in a safe deposit box at the bank.

Categories: Tax News and Tips
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Tax Humor: 1040-DOG

Justin Dagna | July 7, 2008 9:51 pm

Apparently, this is what passes for humor among accountants. You might appreciate this 1040 DOG Canine Tax Return as well.

Categories: Tax News and Tips
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A tax resource for MLMs

Justin Dagna | July 1, 2008 9:52 pm

The IRS web site has a section of their Examiner’s Guide specific to the direct seller industry, such as commissioned salespeople and multi-level marketers of all types.

While the article does include tax information (some of it fairly technical), you’ll also find statistics and demographic information including the number of direct sellers, total income, growth in the industry, methods of selling and much more. For example, did you know that a typical direct seller spends 20% of their time on administrative and paperwork tasks?

Normally I try to avoid shameless plugs for our services in our blog, but think about that number. For a full-time seller, that’s 8 hours per week – one whole day per week – on administration and paperwork. What could you do differently if you had a whole extra day each week?

Categories: Tax News and Tips
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