How Simple is Your Accounting Process?
Presented By:
Debbie Doherty, President/CEO
Although most people won’t be filing their tax returns for several months, the fall months are actually a great time to start planning for the tax filing season by ensuring your records are organized. Whether you are an individual taxpayer or a business owner, you can avoid headaches at tax time with good records because they will help you remember transactions you made during the year.
Here are a few things the IRS wants you to know about record keeping.
Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you are billed for additional tax. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.
Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:
• Bills
• Credit card and other receipts
• Invoices
• Mileage logs
• Canceled, imaged, or substitute checks or any other proof of payment
• Any other records to support deductions or credits you claim on your return
You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:
• A home purchase or improvement
• Stocks and other investments
• Individual Retirement Arrangement transactions
• Rental property records
If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep include:
• Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit cardcharge slips, and forms 1099-MISC
• Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips, and invoices
• Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices, and petty cash slips for small cash payments
• Documents to verify your assets: Purchase and sales invoices, real estate closing statements, and canceled checks
How Long To Keep Records
You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support items shown on your return until the period of limitations for that return runs out.
The period of limitations is the period of time in which you can amend your return to claim a credit or refund or the IRS can assess additional tax. Unless otherwise stated, the years refer to the period beginning after the return was filed. Returns filed before the due date are treated as being filed on the due date.
Below are some examples of the Period of Limitations for an audit or filing an amended tax return.
IF you…
THEN the period is…
1. If you…Owe additional tax then the period is 3 years. IF and only IF(2), (3), and (4) listed below do not ALSO apply to you .
2. If you Do not report income that you should and it is more than 25% of the gross income shown on your return then the period is 6 years.
3. If you File a fraudulent return then there is No limit.
4. If you Do not file a return then there is No limit.
5. If you File a claim for credit or refund within 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 do not file a claim within this period, you may no longer be entitled to a credit or refund.
6. If you File a claim for a loss from worthless securities then the period is 7 years.
Testimonials:
“Element Design Group switched to Doherty & Associates for payroll services after the start of fiscal year 2009 and the transition was very smooth. Their staff worked closely to reconcile our previous accounts and they provided a great level of customer service when the transition posed some challenges. Element has benefited from the change to Doherty and we look forward to the opportunity to utilize some of their complimentary services in the future.”
~Doug Warner, Managing Partner
Element Design Group, LLC
“Doherty and Associates are always ready to serve our bookkeeping and accounting needs. Their staff is prompt, courteous, and very knowledgeable. They are always ready to go the extra mile to solve problems, and with today’s economic conditions, their expertise is very much appreciated.”
~-Janet Butler,
WILMAPCO Executive Assistant
“Doherty & Associates have been the accounting support for our business since 2006 when I realized we had grown beyond what I could do with Quick Books. The company was working in multiple states and the taxes were quite complicated. Never having used an accounting firm before, Debbie Doherty worked closely with us to correct errors and establish good accounting practices. Through Doherty & Associates, we were networked with other necessary business professionals including health care providers, insurance agents and personal as well as business financial advisors. With Doherty & Associates help we were able to grow our business.”
~Beth K.
Doherty & Associates, Inc.
Stoney Batter
Office Building
5301 Limestone Road, Wilmington, DE 19808
PHONE: (302) 239-3500
FAX: (302) 239-3600
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