Are you looking for ways to lower your tax bill? Itemizing your deductions can potentially reduce what you owe. Common deductions include medical expenses, charitable donations or unreimbursed job-related expenses. If you decide to claim deductions, it’s very important that you keep accurate records and receipts to meet IRS requirements.
What Are Accurate Records?
According to IRS Publication 463, any evidence you use to support a deduction must be “documentary” and “adequate”, meaning it must be written and show the date, place, amount and nature of the expense. Examples of the types of documentary evidence you can use to support your deduction include mileage logs, itemized credit card receipts, bank statements, taxi and toll receipts, receipts for gifts, and receipts from gas stations, hotels and restaurants. NOTE: Credit card statements without itemized, supporting receipts are NOT adequate.
If you’re self-employed, keep the receipts for any business-related expense you incur, no matter how small. If you plan to claim the home office deduction, you’ll also need to keep detailed records regarding your home, including any costs you pay for property tax, rent, mortgages, utilities and repairs. You should also maintain detailed records if you’re paying out-of-pocket costs for your health insurance or other medical expenses.
As a general rule, the IRS advises taxpayers to maintain records for at least three years following their tax filing. If you file early, the three-year limitations period begins on the annual filing deadline. No records are necessary if you claim the standard deduction but you could end up owing more in taxes. Even if you don’t plan on itemizing, it’s still a good idea to keep a paper trail so you can compare your deductions before you file.
If you would like to discuss your specific situation, please contact us.