Posted on 12/19/2014 by Cch. IRS Commissioner John Koskinen predicted a complex and challenging filing season due to cuts in the Service’s funding. “The IRS expects the upcoming filing season to be a very complex one, so it’s more important than ever for people to consider getting help with their taxes, and to choose that help wisely,” Koskinen told reporters at a news conference in Washington, D.C. on December 18. Koskinen highlighted the Service’s having to do more with less because of reduced funding, the complexity of new requirements under the Patient Protection and Affordable Care (PPACA) (P.L. 111-148), and other recent circumstances.Read more
As we approach year-end, many of us may need to catch up on our charitable contributions for a number of reasons in addition to a tax break. So, let's briefly review the IRS rules on deducting charitable contributions. A donor will not be allowed any deduction for a contribution by cash or check, or any other monetary gift, regardless of the amount unless the donor retains either (1) a bank record that supports the donation or (2) a written receipt or communication from the charity showing the name of the organization, date, and amount of the contribution.
Property donations valued at less than $250 must be substantiated by a written receipt or letter from the charitable organization showing the organization's name, the date and place of the contribution, and a detailed description of the property. Donors must also obtain a written acknowledgment from the charity if the value of the contribution (in cash or other property) is $250 or more - a canceled check or other reliable records are not sufficient proof.
Please contact us if you have questions about substantiating charitable contributions.
Retaining and storing your income tax information and records is an important final step of your tax filing responsibility. This article contains information on the rules for keeping your tax records.
When determining how long to keep most of your income tax information and records, look at (a) the time frame over which the IRS can audit a return and assess a tax deficiency or (b) the time frame during which you can file an amended return. For most taxpayers, this period is three years from the original due date of the return, or the date the return is filed, if later. For example, if you filed your 2008 Form 1040 on or before April 15, 2009, the IRS has until April 15, 2012, to audit the return and assess a deficiency. However, if a return includes a substantial understatement of income, which is defined as omitting income exceeding 25% of the gross amount reported on the return, the statute of limitations period is extended to six years.
A good rule of thumb for keeping tax records is to add a year to the IRS statute of limitations period. Using this approach, you should keep your income tax records for a minimum of four years, but it may be more prudent to retain them for seven years, which is what the IRS informally recommends. State tax rules must also be considered, but holding records long enough for IRS purposes will normally suffice for state tax purposes, assuming the federal and state returns were filed at the same time.
Certain tax records, however, should be kept much longer than described above and some, indefinitely. Records substantiating the cost basis of property that could eventually be sold, such as investment property and business fixed assets, should be retained based on the record retention period for the year in which the property is sold. Tax returns, IRS and state audit reports, business ledgers, and financial statements are examples of the types of records you normally should retain indefinitely.
Keep in mind that there may be nontax reasons to keep certain tax records beyond the time needed for tax purposes. This might include documents such as insurance policies, leases, real estate closing statements, employment records, and other legal documents. Your attorney can provide additional guidance.
We hope this brief overview helps you under-stand the income tax record retention rules. If you have any questions regarding your specific situation or if you would like to discuss these rules in more detail, please give us a call.
Established as "the Official Link to the U.S. Government," Business.GOV at www.business.gov is a unique website for business owners. Operated by the Small Business Administration, this website offers business owners information on how to find loans and grants, start a home-based business, register a business name, search or
register a corporation, obtain a business license, get information on employment laws, and bid on government contracts.
Within the loans and grants area, for example, business owners can search for loans, grants, and financing using a checklist starting with the business type. The user may then select the type of financing needed, e.g., working capital. He or she is then given a list of several loan programs to review and pursue to obtain a working capital loan. This website provides an avenue for business owners to locate financing or other assistance to help survive the current economic situation.