Now is a good time for people to begin thinking about next year’s tax return. While it may seem early to be preparing for 2021, reviewing your recordkeeping now will pay off when it comes time to file again.
Here are some suggestions to help taxpayers keep good records.
- Taxpayers should develop a system that keeps all their important information together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.
- Throughout the year, they should add tax records to their files as they receive them. This includes Notice 1444, Your Economic Impact Payment, and unemployment compensation documentation. Having records handy makes preparing a tax return next year easier.
- Taxpayers should notify the IRS if their address changes. They should also notify the Social Security Administration of a legal name change to avoid a delay in processing their tax return.
- Review their tax return to make sure they didn’t overlook any credits or deductions. Double check credits and deductions. Records that taxpayers should keep include receipts, canceled checks and other documents that support income, including any unemployment compensation.
- Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for figuring gains or losses.
- Taxpayers should keep records for three years from the date they filed the return. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
- Business taxpayers can choose the bookkeeping method that suit their need. The method should clearly and accurately reflect gross income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
IRS.gov has several tools taxpayers can use to stay updated on important tax information that may help with tax planning. People can also download the IRS2Go app, watch IRS YouTube videos and follow the agency on social media.
Publication 5349, Year-Round Tax Planning is for Everyone