Spring Cleaning: Tax Records You Can Throw Away -

Spring Cleaning: Tax Records You Can Throw Away

Spring is a great time to clean out that growing mountain of tax and financial papers that clutters your home and office. Here's what you need to keep and what you can throw out without fearing the wrath of the IRS.

By Richard Lipton, CPA
Richard L. Lipton CPA & Associates LLC, www.liptoncpa.com

Spring is a great time to clean out that growing mountain of tax and financial papers that clutters your home and office. Here’s what you need to keep and what you can throw out without fearing the wrath of the IRS.

Let’s start with your "safety zone," the IRS statute of limitations. This limits the number of years during which the IRS can audit your tax returns. Once that period has expired, the IRS is legally prohibited from even asking you questions about those returns.

The concept behind it is that after a period of years, records are lost or misplaced and memory isn’t as accurate as we would hope. There’s a need for finality. Once the statute of limitations has expired, the IRS can’t go after you for additional taxes, but you can’t go after the IRS for additional refunds, either.

The Three-Year Rule
For assessment of additional taxes, the statute of limitation runs generally three years from the date you file your return. If you’re looking for an additional refund, the limitations period is generally the later of three years from the date you filed the original return or two years from the date you paid the tax. There are some exceptions:

• If you don’t report all your income and the unreported amount is more than 25% of the gross income actually shown on your return, the limitation period is six years.
• If you’ve claimed a loss from a worthless security, the limitation period is extended to seven years.
• If you file a “fraudulent” return, or don’t file at all, the limitations period doesn’t apply. In fact, the IRS can get you at any time.

If you’re deciding what records you need or want to keep, you have to ask what your chances are of an audit. A tax audit is an IRS verification of items of income and deductions on your return. So you should keep records to support those items until the statute of limitations runs out.

Assuming that you’ve filed on time and paid what you should, you only have to keep your tax records for three years, but some records have to be kept longer than that.

Remember, the three-year rule relates to the information on your tax return. But, some of that information may relate to transactions more than three years old.

Here’s a checklist of the documents you should hold on to:

1. Capital gains and losses. Your gain is reduced by your basis – your cost (including all commissions) plus, with mutual funds, any reinvested dividends and capital gains. But you may have bought that stock five years ago and you’ve been reinvesting those dividends and capital gains over the last decade. And don’t forget those stock splits.

You don’t ever want to throw these records away until after you sell the securities. And then if you’re audited, you’ll have to prove those numbers. Therefore, you’ll need to keep those records for at least three years after you file the return reporting their sales.

2. Expenses on your home. Cost records for your house and any improvements should be kept until the home is sold. It’s just good practice, even though most homeowners won’t face any tax problems. That’s because profit of less than $250,000 on your home ($500,000 on a joint return) isn’t subject to taxes under tax legislation enacted in 1997.

If the profit is more than $250,000/$500,000, or if you don’t qualify for the full gain exclusion, then you’re going to need those records for another three years after that return is filed. Most homeowners probably won’t face that issue thanks to the 1997 tax law, but of course, it’s better to be safe than sorry.

3. Business records. Business records can become a nightmare. Non-residential real estate is now depreciated over 39 years. You could be audited on the depreciation up to three years after you file the return for the 39th year. That’s a long time to hold on to receipts, but you may need to validate those numbers.

4. Employment, bank and brokerage statements. Keep all your W-2s, 1099s, brokerage, and bank statements to prove income until three years after you file. And don’t even think about dumping checks, receipts, mileage logs, tax diaries and other documentation that substantiate your expenses.

5. Tax returns. Keep copies of your tax returns as well. You can’t rely on the IRS to actually have a copy of your old returns. As a general rule, you should keep tax records for 6 years.

The bottom line is that you’ve got to keep those records until they can no longer affect your tax return, plus the three-year statute of limitations.

6. Social Security records. You will need to keep some records for Social Security purposes, so check with the Social Security Administration each year to confirm that your payments have been appropriately credited. If they’re wrong, you’ll need your W-2 or copies of your Schedule C (if self-employed) to prove the right amount. Don’t dispose of those records until after you’ve validated those contributions.

You can confirm your payments and estimate your future benefits by filing Form SSA-7004 with the Social Security Administration. You can download the form, or apply online.


Richard L. Lipton CPA & Associates LLC, located in Florham Park, N.J., draws on its founder’s 10 years as a stockholder and manager of family-owned Sam’s Tire Co. in Paterson, N.J.

Richard L. Lipton CPA & Associates LLC “is structured to personally serve large and small clients who have a need for business consulting services as well as accounting and tax services. We have even developed a niche in the area of forensic accounting. Our clients have realized that this combination of skills is extremely valuable in providing the highest quality professional services in today’s and the future’s economy.” – Richard L. Lipton CPA
 
Contact Richard L. Lipton CPA & Associates LLC:

Call: 973-520-8123
E-mail: [email protected]
Web: www.liptoncpa.com

Article Courtesy of TIRE REVIEW.

You May Also Like

Phone Shoppers Made Easy

Although there is no silver bullet that will allow you to bring in every first-time caller, there are a number of things you can do to get more appointments. In this article, I would like to share some of the best practices your advisors can use that will generate immediate results.

By Bob
Cooper of Elite

With
vehicles being built better than ever before, and with service intervals
continually being extended, you are going to see your customers less often.
This means your service advisors are going to have to be razor sharp when the
phone rings. Although there is no silver bullet that will allow you to bring in
every first-time caller, there are a number of things you can do to get more
appointments. In this article, I would like to share some of the best practices
your advisors can use that will generate immediate results.
In order for
someone to buy from you, three things need to occur: They have to like you,
they have to trust you, and they have to view you as a credible expert. So when
your phone rings, the first thing your advisors need to sell is themselves; not
the service or repair. The best way of accomplishing this goal is with a
professional, courteous and upbeat greeting, such as “Thank you for calling
Elite Auto Care, this is Bob. How can I help you this morning?” By using these
words we’re showing appreciation, by volunteering the name of our company we’re
assuring the callers that they’ve called the right number, and by providing our
name we’re beginning to build personal relationships. By asking how we can
help, we’re asking a question that will allow us to control the conversation.
By being upbeat and using the right tonality, our likeability goes up, and the
customer’s anxiety goes down.
The second
thing your advisors will need to do is slow the conversation down so the
callers don’t feel rushed, and they’ll have to become good detectives by asking
a number of questions. By having the callers talk, it will take their focus off
of the price, and it will allow them to begin to feel more comfortable with
your advisors at the same time.
When it comes
to asking for the appointment, one of the best kept secrets I can share with
you is this: With rare exception, your advisors need to offer every caller a
choice of appointment times, and whenever possible, one of those options should
be for them to bring the vehicle in now. For example; “I can squeeze you in
now, or would 2:15 be better for you?”
When it comes to auto repair, customers love finality, which is why
providing the “now” option is a powerful sales tool.
Now here’s
the absolute best-kept secret for dealing with the tough first-time callers.
Every one of your advisors needs to be aware that many “price shoppers” are
asking for price just to start the conversation, and beyond that, with rare
exception, callers don’t know the questions they should be asking. This is why
it’s a good idea to ask your service advisors to write down a list of the
questions that they think an educated caller would ask. Once they have their
lists completed, and committed to memory, then it’s easy for them to respond to
price inquiries with a statement like, “Well Larry, I know price is important
to you, and it should be, but if you call five different shops today, you’ll
more than likely get at least five different prices. Some of the other
questions you might want to ask are how long they’ve been in business, whether
or not they have certified technicians and a drug-free workplace program, and
you might want to have them walk you through their diagnostic processes as
well. You might also want to ask them if they always explore all of the options
that are available to customers when it comes to any recommended repairs, what
kind of warranties they provide, and if those warranties are in writing.”  Ladies and gentlemen, I’ve closed hundreds,
if not thousands of tough first-time “price shoppers” using this technique, so
I know it will work for you.
 If you’re still not quite sold, then consider
this. If you take my recommendations, when those price shoppers start calling
other shops, you know as well as I do that they’ll more than likely ask some of
the questions your advisors suggested to them. Not only will your competitors
be caught off guard and struggle with the answers, but in each case, the
callers will be thinking of your advisors. This is when they’ll not only realize
how well your advisors handled the call, but they’ll trust your advisors, and
you bet; they’ll now view them as credible experts as well.
For help permanently
increasing your service advisors’ sales and CSI scores, learn more about the Elite Masters Service Advisor Training
Program.

The True Cost Of Comebacks

Comebacks are a hot topic today. You need to track all comebacks, determine the reason (tech error, part error, training issue, other) and then calculate the true cost of the comeback.

Want To Increase A/C Sales?

Have your techs, as part of their preliminary checks, turn on the A/C and see if the system is working. Is the compressor turning on? Are all the fan speeds working? Is the system getting cold? Is there a smell from the vents?

Call For Entries For The ATMC National Excellence In Training Awards

The Automotive Training Managers Council (ATMC) has issued a call for entries for the 2014 National Excellence in Training Awards. The annual program is designed to highlight the importance of training to the success of the transportation industry by honoring highly effective or innovative training programs. The awards are open to any person or entity providing training in the industry.

CARS 2014: ‘Not Your Father’s Oldsmobile’

From ASA comes word that CARS this year “is not your father’s Oldsmobile.” This year’s CARS will be held July 30-Aug. 2 in Detroit and, for the first time, the focus will be on younger techs. Each program at CARS this year has been handpicked with an eye toward making your shop better, said Donny Seyfer, chairman-elect of the Automotive Service Association, which sponsors CARS.

Other Posts

GAAS Attendees Get ‘Connected’ In Chicago

Attendees of the Global Automotive Aftermarket Symposium’s (GAAS) 2014 Connected conference were engaged in a range of high-level topics affecting the automotive aftermarket now and in the future.

Raybestos Rattlesnake Sweepstakes Winner Receives His Ride

Not even heavy rain and winds could dampen the festive mood at Automotive Electric Distributors (AED) in Vancouver, Wash., on Friday, May 9, the day that David Cramer received the keys to his custom 2014 Raybestos Rattlesnake Toyota Tundra.

NACE/CARS 2014 Meets Shop Owners’ Education, Training Needs

NACE/CARS 2014 has announced the full training and education conference program that organizers say will have shop owners, technicians and industry stakeholders covered from A to Z when it comes to training, education and unbeatable new sessions. In addition to this year’s event being the largest conference offering in NACE/CARS history, show organizers also have many of the industry’s leading experts speaking at this year’s event.

June 9-15 Is Automotive Service Professionals Week

The National Institute for Automotive Service Excellence (ASE) has declared June 9-15 as National Automotive Service Professionals Week. Building on the success of Automotive Service Professionals Day established in 2001, ASE launched National Automotive Service Professional’s Week in 2005 to honor the commitment and dedication of automotive, truck and collision technicians, along with parts specialists and other support professionals who serve the motoring public.