Nagy’s 8 Essentials For Record Keeping

Nagy’s 8 Essentials For Record Keeping

I get pretty excited about the spring. All around the country, the snow is gone, the trees don’t seem so desolate … and am I right that the angle of the sun is a bit less harsh?

Or maybe it’s just because tax season has finished and I’m getting more sleep? 🙂

Well, I hope you and your family will have some “spring” this year — in the more figurative sense; whether or not it’s in the next couple of months. The winter always seems longer than it really is (even when it really *is* long!), but I’m also reminded of how necessary it is.

You see, like the lifecycle of an economy, I still believe that it’s a *good* thing to experience a time of dormancy. Speaking biologically, plants and flowers often need that time of “being withdrawn” to survive the “facts on the ground” (really cold temps).

It’s a classic picture of a healthy cycle — pull back a little when it’s harsh, but look for the warmer temps and be ready to bloom.

I don’t know all the details of your personal situation. But I do know that you and I have a choice about how we’re gonna weather our different financial seasons. Keep acting like it’s summer (when it’s really winter out there), and you’ll wither, and suffer for it.

But the opposite is also true — keep staying “shut down” and dormant when the weather is turning up … and, well, you’ll miss your chance to really grow up and blossom.

Fine — I’m a tax pro, not a poet, but you get the point. Don’t be afraid to step out again, just because it’s been cold for awhile out there.

And one of the best ways to KNOW if you can do this is to keep the essential information at hand …

Nagy’s 8 Essentials For Record Keeping
“Success is simple. Do what’s right, the right way, at the right time.” – Arnold Glasgow

Now’s the best time to get rid of unnecessary paperwork, as well as to ensure that you caught everything for your 2014 tax return.

But before I get to what to do if you find something pertinent to your recently-filed tax return, here are 8 essentials for record keeping (and how long to keep them)…

1. Taxes: Seven years
Nagy’s Reasons Why:
There are three, actually:
1) The IRS has three years from your filing date to audit your return if it suspects good-faith errors.
2) The three-year deadline also applies if you’d like to make some sort of amendment because you discover a mistake in your return and can claim a refund.
3) The IRS has six years to challenge your return if it thinks you underreported your gross income.
All this adds up to keeping that info for seven years. Beyond that, there’s no reason — except for posterity.

2. IRA contribution records: Permanently
Nagy’s Reasons Why:
You’ll need to be able to prove that you already paid tax on this money when the time comes to withdraw.

3. Bank records: Usually just one year
Nagy’s Reasons Why:
Those related to your taxes, business expenses, home improvements and mortgage payments will obviously need to be included for next year’s taxes. But unless there is some sort of emotional or posterity reason, get rid of everything after one year.

4. Brokerage statements: Until you sell
Nagy’s Reasons Why:
To prove whether or not you have a capital gain or loss for tax purposes; after this point, shred it.

5. Household bills: From one year to permanently
Nagy’s Reasons Why:
When the canceled check from a paid bill has been returned, you can shred the bill with a clear conscience. However, bills for big purchases — such as jewelry, rugs, appliances, antiques, cars, collectibles, furniture, computers, etc. — should be kept in an insurance file for proof of their value in the event of loss or damage.

6. Credit card receipts and statements: 45 days/Seven years
Nagy’s Reasons Why:
Some families don’t even bother to match up their statements, but if you do so, shred the receipts once you’ve verified everything. There’s no reason to keep everyday receipts beyond this point. For tax-related purchases, you need only keep the statements for seven years — after that, shred it, baby!

7. Paycheck stubs: One year
Nagy’s Reasons Why:
This is to verify that when you receive your annual W-2 form from your employer, the information from your stubs match. If so, shred all of the stubs … if not, request a corrected form, known as a W-2c. After that’s been handled — shred.

8. House/condominium records: Six years/permanently
Nagy’s Reasons Why:
You’ll want to keep all records documenting the purchase price and the cost of permanent improvements — such as remodeling, additions and installations as well as records of expenses incurred in selling and buying the property, such as legal fees and your real estate agent’s commission, for six years after you sell your home.

Holding on to these records is important because any improvements you make on your house, as well as expenses in selling it, are added to the original purchase price or cost basis. Therefore, you lower your capital gains tax when you sell your house.

Now, in this cleansing process, sometimes, you’ll find a receipt or a documentation which really would have changed your prior year tax return. That’s when you might have us file an Amended Return. However, this decision should be balanced against the cost of doing so, as well as the expected benefit — often these items can be dealt with the following year.

But here are some other, common reasons to amend…

* You neglected to report some income earned.
* You claimed deductions or credits you should not have claimed.
* You did not claim deductions or credits you could have claimed.
* You filed under one filing status, but you should have filed under another.
* You bought a residence and didn’t claim the First Time Homebuyers Credit (or other credits available).

If you find something like this, let us help you. 816-272-8151

Regardless, let this be a cleansing process for you, and sleep easy knowing you’ve handled this stuff properly.

Oh, and make sure you use a good shredder!

And for those of our clients who have previous years’ tax returns at another preparer, OR for their friends…

+++++++++++++++++
“No Charge” Return Review
Special
Offer
As a complimentary service this year, we will provide a Return Review To Any Non-Client. We will also review prior year returns from clients who did NOT have us handle their taxes during the year under question. No charge will be made, unless we have to file an amended return. Email our office (using the email button at the top of this page) or call 816-272-8151 to set up this complimentary service!
Deadline May 8th
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To more of your money staying in your wallet…

Kyle Nagy
816-272-8151

Kyle P Nagy, CPA

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