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Monthly Archives: October 2012

29 October, 2012 12:50

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How Long Do I Need to Keep My Tax Records?

One thing that annoys me about our home office is the sheer amount of paperwork we have filed (and semi-filed, you know the whole stuff it in the cabinet system, right?) and stored. One of our goals before the year is over is to FINALLY get the home office organized and that means getting our filing system in order.

Before we throw out old documents and clean out the room, we need to know what to keep (and for how long) and what we can shred, especially when it comes to our tax records.

What Kinds of Tax Records to Keep

I decided to check the IRS guidelines first. The gist of their guidelines is that you only need to store records for as long as the period of limitations applies. For example, that means that if there is still time for you to amend one of your tax filings, you should keep the records for that tax year. The period of limitations is the period of time in which you can amend your tax return to claim a tax credit or tax refund or that the IRS can assess additional tax.

The IRS also has different timetables, depending on your circumstances as follows:

Period of Limitations
IF you… THEN the period is…
1 Owe additional tax and
(2), (3), and (4) do not
apply to you (3 years)

2 Do not report income that
you should and it is more
than 25% of the gross
income shown on your
return (6 years)
3 File a fraudulent return (No limit)
4 Do not file a return (No limit)
5 File a claim for credit or
refund after you filed
your return (The later of 3 years or 2 years
after tax was paid.)
6 File a claim for a loss from
worthless securities (7 years)

I should also note that even though you may not need to keep these records for tax purposes, please check to see if you need them for some other financial or legal reason.

How to Store Tax Records

As I reviewed the IRS guidelines, I noticed that they did not specify a particular method on how to store your records. That means that if you prefer, you can keep an electronic back up of your tax records. You can also keep them in the traditional paper form as well, it’s up to you.

If you’re trying to explore some options for digital storage here are a few you may want to check out:

Scan/Save: The easiest way to save and store that data is to go ahead scan and save the copies. You can put it on an external hard drive where you can store in a secure place.
DropBox: They specialize with digital storage and have several plans available including free, professional, and team accounts.
Amazon CloudDrive: Amazon also has a digital storage service that is free for the first 5 GBs.

Of course, you have to weigh which options would be best for you and your organizational needs. Since much of these records have sensitive financial information, please make sure whatever you choose is secure.

Thoughts on Storing Tax Records

For us that means we’ll be spending a weekend getting our financial records stored in a secure spot while shredding all of our old stuff from college. Hopefully it’ll only be a weekend project and we’ll have more space available to rearrange everything in our office next month.

I’d love to hear from you about how your filing system is done at home? How long do you keep your records (tax related and not)? Do you have electronic filing as a part pf your system? Why or why not?

QB-Xpert

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What Should I Do if I Missed the Extended Tax Deadline?

The 2011 extended tax deadline was October 15th and while many scrambled to make the tax deadline, some of you may have missed it and are wondering what to do. Don’t worry! If you missed the extended tax deadline, here are answers to 5 of your burning questions to help you figure out what to do next.

Tax Filing After Deadline
I missed the tax deadline. Should I still file?

Yes, you should still file your taxes as soon as possible.

How should I file my taxes?
IRS e-file is now closed, but there is good news. You can still file using other online Tax filing provider and mailing in your tax return.

Will the IRS charge penalties for not filing by October 15th?
If you have a tax refund coming, there is no penalty for filing late. Penalties are calculated based on amounts due.

If I owe money, will I be charged penalties and interest?
Unfortunately, you will receive three separate penalties on balances due on late tax returns as follows:

Failure-to-file penalty
Failure-to-pay penalty
Interest

The failure-to-file penalty can be the most steep, as it starts out at 5% for each month the tax return is not filed, up to a total penalty of 25% of your balance due, which is why you should file your taxes as soon as possible. Even if you owe money and can’t pay it you should still file to eliminate this penalty. In addition, you may be eligible for other payment options under the IRS Fresh Start Initiative.

If I have a hardship will I still have to pay penalties?
If you show the IRS reasonable cause for not filing on time, you may not have to pay penalties.

In addition, 2011 tax deadlines for individuals and businesses impacted by Hurricane Isaac have been extended to 1/11/2013.

Hopefully this puts your mind at ease and moves you closer to filing your taxes. Just because you didn’t make the tax deadline doesn’t mean you should forget about filing altogether. Who knows? You may be missing out on a tax refund.

QB-Xpert

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Extension Filers Series: I Don’t Think I Made Enough Money to File Taxes. Why Should I?

The October 15th tax extension deadline is here and year after year the IRS reports that people are leaving about $1 billion in unclaimed tax refunds on the table, because they think they don’t make enough money to file taxes. Plenty of citizens who have low income don’t technically have to file their taxes, but even if your gross income falls below the IRS guidelines, it’s usually a good idea to spend a little time to file your taxes for reasons we’ll go into.

Why You Should File (Even if You Don’t Think You Have To)

Even if you don’t think you make enough money to file an income tax return, it’s still a good idea to file. There are some circumstances in which you might actually be eligible to get some money back, and if you don’t file your tax return, you won’t get that money. Here are two good reasons to file:

1. Tax withholding: Is your workplace withholding money from your paycheck for federal income taxes? If so, then the government may owe you money. If you want that tax refund from your withholding, you need to file a tax return.

2. Refundable tax credits: There are a number of tax credits offered to those with lower incomes. These tax credits are refundable, or partially refundable, meaning that you may get excess money refunded even if there is no tax liability to apply the tax credit to.

Credits like the Earned Income Tax Credit and the Child Tax Credit can mean more money in your pocket. The average EITC is $2,000. Each year, there are different tax credits and opportunities and QB-Xpert Tax gets you the refundable tax credits available if you qualify. It’s worth it to file a tax return in order to get that money.

Filing your tax return is one way to make sure that you are getting the money that you are entitled to. Double-check your situation. Even if you don’t have to file a tax return, it might be to your financial benefit if you decide to file anyway because of over withholding and refundable tax credits.

QB-Xpert

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