April 15…Income Tax filing deadline

Today is April 15 – the deadline for mailing in 2012 income tax returns.  While completing the task can be rewarding, the Internal Revenue Service says the burden of proof is on the taxpayer. The easiest way to prove income, deductions or credits is through simple and concise record keeping.
According to IRS Publication 552, “You should keep your records in an orderly fashion and in a safe place. Keep them by year and type of income or expense. One method is to keep all records related to a particular item in a designated envelope.”

The Financial Planning Association says items that should be kept for one year include:  paycheck stubs, utility bills, cancelled checks, credit card receipts and bank statements.

For seven years, FPA suggests taxpayers retain brokerage statements, income tax returns, receipts/cancelled checks/documents that support income and/or deductions, and 1099s.

Items to hold on to as long as funds or accounts are active include: contracts, insurance documents, stock certificates, property records, warranties, stock records, pension and retirement plan records, property tax records and home improvement records.

And, never throw away life insurance policy records, wills or mortgage documentation.

The IRS also says taxpayers should keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition.  You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.  Find out more at www.irs.gov.

When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes.  For example, your insurance company or creditors may require you to keep them longer than the IRS does.