Getting ready for Tax Day can be quite stressful, especially if you aren't the most organized record keeper. Some more tech-savvy individuals may have already taken the plunge into online record keeping, and there are several apps available that can assist with this task. Most of these apps will help to organize your previous tax filings and forms, loan payments and interest, retirement account contributions, pay stubs and deductible purchase receipts.
For those of you who have not taken the leap into the world of online record keeping, you probably have a ton of paperwork, receipts and forms to sort through and organize. The question is, what do you need and how long will you need to keep it?
For those of you that are not familiar with the IRS, it is very important to have accurate records if they request them during an audit. Record keeping is one of the most important aspects of preparing for tax season. That the statute of limitations for an audit is three years after filing, so you should always save at least your tax information from your three latest filings. If the IRS has reason to believe that you have underpaid your taxes by 25% or more, then you can be asked to produce up to six years of documentation. If you have not filed, then the statute of limitations does not apply at all.
It is very important to keep accurate records for yourself, your accountant, and of course, the IRS. If you do not have the files or documentation that has been requested during an audit, you could find yourself in a world of trouble and in sudden need of an emergency loan. To protect yourself, make sure you always have the proper records on file.
If you are self-employed, then you may want to hold on to your tax filing records even longer. Individuals who are self-employed usually experience more scrutiny from the IRS, and are much more likely to be audited. According to IRS statistics, less than 1% of all individual filings were audited in 2015, but mid-income, self-employed filers were audited at nearly 3x that rate.
The information you will need to provide when you visit your accountant will include bank statements, investment statements, loan interest statements, insurance statements and receipts. The receipts needed can include anything from tuition payments, to insurance payments, to charitable donations that you have made.
Once you have organized your records, it may be a good idea to create a check list. The check list should include the same items that you provided your accountant with the previous year, and any additional information that may have been added or changed this year. If you are unsure about providing any other information, just give your accountant a call or send a quick email to verify.
With any luck, you will get money back this year, instead of owing. If that is not the case, and you've been hit with an unexpected charge, don't scramble to gather money for the IRS; auto title pawns could provide emergency cash amounts up to $15,000 in as little as 30 minutes.