After filing your tax return, do not close the book on your taxes until you have set
up next year’s files, purged unneeded old records, and prepared your records in
case of an audit.
Here are some tips.
With a sigh you are relieved that yet another tax return has been sent off to the government. Another 12 months before you need to do this again. But before you close that tax file, there is still some work to do. If the IRS or state revenue department selects your return for review, you will need to be prepared. Here is what you need to know:
Record Keeping Tips
- Normally three years. Normally tax records should be kept for three years from the later of the tax filing due date, the date you filed your taxes, or the date you paid your tax in full.
- Some documents should be saved indefinitely. This includes things like:
- Your tax return
- Records related to a home purchase or sale
- Stock transactions
- Business/Rental records
- The IRS does not require any special record keeping system. You just need to keep all documents that can support information on your tax return.
- Here are common records worth retaining:
- Canceled checks
- Invoices
- Other proof of payment for claimed deductions
- Bank and credit card statements
- Mileage logs
- Receipts with time; place; and purpose noted
- Be mindful of other record retention requirements
- State record retention requirements are often 6 months to 1 year longer than Federal requirements
- Social Security records often need to be proofed to ensure they match your pay stubs
- Insurance, banking, and estate management may require other records
- Federal retention requirements become 6 years if your return understates your tax obligation by more than 25%, and the record retention period is indefinite if fraud is involved.
Keep a good system
So the build up of paperwork does not overwhelm your attic, at the end of the tax year rotate your records. Decide how many years of records must be retained. Then count back from your current tax return filing year and shred unneeded, older documentation. Create new empty files for the current tax year to save receipts for the coming year. Consider scanning records to keep digital copies. A final word of caution. If you are unsure whether to retain or shred, keep it unless you know the document can be replaced.
Most of us only see the media portrayal of the lottery. Lucky winner, lots of cash.
Outside of the bright lights is the true winner: the taxman.
Here is what you need to know.
Most everyone enjoys dreaming of winning it big in the lottery. News media outlets publicize the large unclaimed pots of money on the evening news and they put a spotlight on the lucky multi-million dollar winners. Ever wonder what the tax math looks like?
The bottom line when seen from a wage stand point is that 75% or more of the income used to play the lottery does not end up in the hands of the winner.
If you are participating in an HSA, recently announce limits for 2014 will help
you get a jump on planning for next year.
The savings limits for the ever-popular Health Savings Accounts (HSA) are now set for 2014. The new limits are outlined here with current year amounts noted for comparison purposes.
What is an HSA?
An HSA is a tax advantaged savings account where part of your wages can be contributed on a pre-tax basis. There is no tax on the funds contributed or the interest or investment earnings as long as the funds are used to pay for qualified medical, dental and vision expenses. To qualify for this tax-advantaged account you must be enrolled in a “high deductible” health insurance program as defined by HSA rules.
The limits
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Note: To qualify for an HSA you must have a qualified High Deductible Health Plan (HDHP). To qualify, a plan must meet minimum deductible requirements that are typically higher than traditional health insurance. In addition, your coverage must have reasonable out-of-pocket payment limits as set by the above noted maximums.
Not sure what an HSA is all about? Check with your employer. If they offer this option in their health care benefits, they will have information discussing the program and its potential benefits.
Unlike fishing, phishing has no limits and can hurt anyone it touches. As one of the top 12 IRS tax scams, you do not want to take this bait. Here is what you need to know.
Each year the IRS publishes the top dozen tax scams it encounters over the prior year. One of them that makes an all too common appearance on their list is the phishing scam. Here is what you need to know.
Phishing requires bait
Phishing is the act of creating a fake e-mail or website that looks like the real thing. This “bait” is then used to bring you into the scam by asking for private information. This includes your name, address, or phone number. It could also include potentially dangerous ID theft information like your social security number, a credit card number or banking information. The bait is often very real looking – just like correspondence from the IRS or the IRS web site.
How to avoid the lure
How do you know the phishing is fake? Here are some tips.
- The IRS never initiates contact via email. If you get an unsolicited e-mail from the IRS requesting a response, do not reply! Instead forward the email to: spill blackjack
phishing@irs.gov - Know the IRS or vendor web site. This includes the appearance, but more importantly the address. The valid address for the IRS is: www.irs.gov
- They may know some things. Good phishers already have parts of your identity, so just because they know things like your middle name and birth date does not make them legitimate.
- What about phone calls? Phishing over the phone is also a problem. If you receive an unsolicited phone call, get the person’s name and ID. Hang up. Then go to the IRS (or vendor) web site, take down their phone number and call them back using this phone number. Most fake calls are ended quickly when taking this approach.
- Don’t forget social media. Phishing can also happen via social media and texting. Virtually every digital resource has the potential to be used as a tool for theft.
What do phishers do?
When the phishers have your information, they can file false tax returns requesting refunds, steal bank information, set up fake credit cards, establish false IDs plus much more. Remember if it smells like a phish, it probably is.