Tax Records: Your One-Minute Guide
What to keep and what to toss
Which records should you keep for tax purposes and which ones can you run through the shredder? It depends on your personal circumstances, but here are a few basic suggestions.
Investments. Keep track of prices and trade dates of securities bought and sold during the year. The records should reflect your basis for capital gain treatment. Also, retain 1099 forms for dividends and capital gains from mutual fund investments. These must be reported on your 2007 return. Set up a system — perhaps using computerized spreadsheets — for tracking dividend reinvestments. It isn't necessary to hold onto every single broker statement received in 2007, but at a bare minimum, you should keep year-end reports.
Charitable donations. Be
aware that new substantiation requirements apply to cash gifts. Obtain a written
confirmation from the charity or support your deductions through bank records
or receipts. For contributions of $250 or more, corroborate gifts with a contemporaneous
written acknowledgement. If you donate property valued at more than $500, you
must provide detailed information about the gift. An independent appraisal
is required for gifts of property above $5,000.
Travel and entertainment. The IRS often challenges business travel and entertainment (T&E) deductions, so be diligent in this area. Keep a contemporaneous record of T&E expenditures detailing dates, locations, amounts, the individuals involved, and your business purpose. Maintain receipts for expenses of $75 or more.
IRA and retirement plans. Keep records of contributions to traditional and Roth IRAs as well as amounts contributed to a 401(k) or other employer-sponsored retirement plan. Note that you have until your tax return due date to make an IRA contribution of up to $4,000 ($5,000 if you're age 50 or over) for the 2007 tax year. Again, retain year-end statements for all retirement accounts.
Home expenses. Collect 1098 forms for mortgage interest and property taxes paid in 2007. For home improvements, keep receipts of expenditures that may be added to your basis. If you sell the home in the future, the basis adjustments can reduce any taxable gain above the $250,000/$500,000 home sale exclusion.
Get organized. Remember that organization
is critical. Preparing your tax return will go much more smoothly if you assemble
your records in a logical manner. For any assistance you need or questions
you have about recordkeeping, give us a call.