Dubrow’s 8 Essentials For Record Keeping
May 4, 2015
Skylar Dubrow, CPA
Blog
May 4, 2015Skylar Dubrow, CPABlog
I get pretty excited about the spring. All around the country, the snow is gone, the trees don’t seem so desolate … and am I right that the angle of the sun is a bit less harsh?
Or maybe it’s just because tax season has finished and I’m getting more sleep? 🙂
Well, I hope you and your family will have some “spring” this year — in the more figurative sense; whether or not it’s in the next couple of months. The winter always seems longer than it really is (even when it really *is* long!), but I’m also reminded of how necessary it is.
You see, like the lifecycle of an economy, I still believe that it’s a *good* thing to experience a time of dormancy. Speaking biologically, plants and flowers often need that time of “being withdrawn” to survive the “facts on the ground” (really cold temps).
It’s a classic picture of a healthy cycle — pull back a little when it’s harsh, but look for the warmer temps and be ready to bloom.
I don’t know all the details of your personal situation. But I do know that you and I have a choice about how we’re gonna weather our different financial seasons. Keep acting like it’s summer (when it’s really winter out there), and you’ll wither, and suffer for it.
But the opposite is also true — keep staying “shut down” and dormant when the weather is turning up … and, well, you’ll miss your chance to really grow up and blossom.
Fine — I’m a tax pro, not a poet, but you get the point. Don’t be afraid to step out again, just because it’s been cold for awhile out there.
And one of the best ways to KNOW if you can do this is to keep the essential information at hand …
Dubrow’s 8 Essentials For Record Keeping
“Success is simple. Do what’s right, the right way, at the right time.” – Arnold Glasgow
Now’s the best time to get rid of unnecessary paperwork, as well as to ensure that you caught everything for your 2014 tax return.
But before I get to what to do if you find something pertinent to your recently-filed tax return, here are 8 essentials for record keeping (and how long to keep them)…
1. Taxes: Seven years
Dubrow’s Reasons Why:
There are three, actually:
1) The IRS has three years from your filing date to audit your return if it suspects good-faith errors.
2) The three-year deadline also applies if you’d like to make some sort of amendment because you discover a mistake in your return and can claim a refund.
3) The IRS has six years to challenge your return if it thinks you underreported your gross income.
All this adds up to keeping that info for seven years. Beyond that, there’s no reason — except for posterity.
2. IRA contribution records: Permanently
Dubrow’s Reasons Why:
You’ll need to be able to prove that you already paid tax on this money when the time comes to withdraw.
3. Bank records: Usually just one year
Dubrow’s Reasons Why:
Those related to your taxes, business expenses, home improvements and mortgage payments will obviously need to be included for next year’s taxes. But unless there is some sort of emotional or posterity reason, get rid of everything after one year.
4. Brokerage statements: Until you sell
Dubrow’s Reasons Why:
To prove whether or not you have a capital gain or loss for tax purposes; after this point, shred it.
5. Household bills: From one year to permanently
Dubrow’s Reasons Why:
When the canceled check from a paid bill has been returned, you can shred the bill with a clear conscience. However, bills for big purchases — such as jewelry, rugs, appliances, antiques, cars, collectibles, furniture, computers, etc. — should be kept in an insurance file for proof of their value in the event of loss or damage.
6. Credit card receipts and statements: 45 days/Seven years
Dubrow’s Reasons Why:
Some families don’t even bother to match up their statements, but if you do so, shred the receipts once you’ve verified everything. There’s no reason to keep everyday receipts beyond this point. For tax-related purchases, you need only keep the statements for seven years — after that, shred it, baby!
7. Paycheck stubs: One year
Dubrow’s Reasons Why:
This is to verify that when you receive your annual W-2 form from your employer, the information from your stubs match. If so, shred all of the stubs … if not, request a corrected form, known as a W-2c. After that’s been handled — shred.
8. House/condominium records: Six years/permanently
Dubrow’s Reasons Why:
You’ll want to keep all records documenting the purchase price and the cost of permanent improvements — such as remodeling, additions and installations as well as records of expenses incurred in selling and buying the property, such as legal fees and your real estate agent’s commission, for six years after you sell your home.
Holding on to these records is important because any improvements you make on your house, as well as expenses in selling it, are added to the original purchase price or cost basis. Therefore, you lower your capital gains tax when you sell your house.
Now, in this cleansing process, sometimes, you’ll find a receipt or a documentation which really would have changed your prior year tax return. That’s when you might have us file an “Amended Return“. However, this decision should be balanced against the cost of doing so, as well as the expected benefit — often these items can be dealt with the following year.
But here are some other, common reasons to amend…
* You neglected to report some income earned.
* You claimed deductions or credits you should not have claimed.
* You did not claim deductions or credits you could have claimed.
* You filed under one filing status, but you should have filed under another.
* You bought a residence and didn’t claim the First Time Homebuyers Credit (or other credits available).
If you find something like this, let us help you. (818) 889-7285
Regardless, let this be a cleansing process for you, and sleep easy knowing you’ve handled this stuff properly.
Oh, and make sure you use a good shredder!
And for those of our clients who have previous years’ tax returns at another preparer, OR for their friends…
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“No Charge” Return Review
Special Offer
As a complimentary service this year, we will provide a Return Review To Any Non-Client. We will also review prior year returns from clients who did NOT have us handle their taxes during the year under question. No charge will be made, unless we have to file an amended return. Email our office (using the email button at the top of this page) or call (818) 889-7285 to set up this complimentary service!
Deadline May 8th
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To more of your money staying in your wallet…
Skylar Dubrow CPA
(818) 889-7285
The Dubrow Group, CPA’s
Preparing a correct and accurate tax return is our priority. We proudly stand behind our work and if a mistake does happen that is our fault, we will immediate correct the mistake and gladly refund your money if requested.
If any penalties or interest are incurred due to our mistake, we will do everything we can to fix the problem and cover any penalties should they arise.
We feel so confident in our processes to account for all deductions and uncover hidden deductions that we guarantee that you will pay the lowest amount of taxes legally possible. We spend a good amount of time correcting and fixing other so called tax pros mistakes and oversights.
We are so committed to giving out clients the best service. We do this by taking thte time to understand our clients situation and asking the right questions to make sure every deduction is accounted for. And remember we work for you, NOT the IRS.
Not only do we prepare an accurate tax return, we will inform you of tax saving strategies and best record keeping practices should we see fit.
Starting January 1, 2017, all our returns come with our “Silver” Stress Free Audit Insurance, FREE with paid tax preparation. Our Silver package includes our full support when handling IRS and State Notices for the 2016 tax year. If you receive a notice, send it to us and we will work with you to organize the required documentation and we will respond to the IRS on your behalf.
“Many tax experts are predicting an increase in IRS audits (because of the system automation), as well as an increase in audits by the state”
Our Gold Package adds our representation for an actual IRS audit for the current year. Whether it be an “audit by mail”, or an actual audit at one of the IRS locations, we will work with you to compile all the necessary documentation and represent you in front of the IRS for no additional charge. Our fees to represent our clients in an audit scenario can range from $1000- $2500 & up depending on time and complexities.
Our Gold option is an optional add on service & not included with regular tax preparation. Gold protection covers the current tax year only regardless of when you get audited.
The IRS and state authorities are behind in auditing tax returns and matching reporting documents to tax returns.They are currently working on 2012 & 2013 years.
Our Platinum level package covers you for a period of 7 years. It Is just like our Gold package, but it includes the currtent year and 6 prior years. We will provide audit coverage for prior years tax returns, even if we did not prepare them.
How is that for taking care of our clients! Once the Platinum level package is purchased, only the gold level will be required in future years as the previous years have been protected by the one time Platinum purchase.
