Important Proof Documentation for Your Tax Returns

Hiring a tax professional

Now that the tax return period is over, at least for those who did not file for an extension, there is always the temptation to push away all the tax preparation documentation and move on into new things. However, before you toss aside your tax documentation, you need to know that the IRS expects you to file your documents for at least 3 years. This is because the IRS can audit your returns up to three years from when you filed them. However, if you had understated you income in any given year by over 25%, the IRS can audit you after 6 years of filing such an “erroneous” return.

Finally, if you had submitted a fraudulent tax return or did not file a tax return at all, the IRS can audit you indefinitely. Therefore, even if you filed your tax returns correctly, you should still keep your tax return documentation for at least three years, just in case. However, note that there are many States that require taxpayers to keep tax documentation for at least four years. Therefore, to be safe, it would be best to keep your tax support documentation for at least four years after filing returns.

However, there are still other documentations that you may need to keep for a longer period for various reasons:

  • If you made a capital gain loss and you need to deduct the loss against future taxable income, then you will need to keep the loss documentation for each year you deduct the losses and, therefore, you will need the loss documentation at least for four years after the year that you made such deductions.
  • If you made major renovations to your house, you will need to keep the receipts and other adjustments documentation together with your records for the purchase of the house until you sell the house. This is because you will need the support documentation when calculating the capital gain tax on the sale of the house.Read more here!
  • If you sold your property under a 1031 exchange, then the sales agreement support documentation will be required as long as you are receiving the sale exchange deposits. You should keep the documentation for at least four years after you receive your final deposit and had wrapped up the sale.
  • If you had any carry forward funds such as business losses carried forward, deferred tax carried forward from sale of a house, and a passive loss carried forward, you will need the relevant documentation until you have exhausted the carry forward and four years thereafter.
  • If you are disabled and take credits on taxes because of your disability, then you will need to keep the record from a medical practitioner that stated that you are disabled to keep evidence of the date you were officially declared disabled.
  • Hiring a tax professionalIf you make retirement contributions, keep the contribution statements, such as the IRS Form 8606, Form 5498, and Form 1099-R, until you receive the final distribution from your retirement fund.
  • At times, you may be required to take photographs as support documentation. This comes to play when you have a home office and when claiming casualty or theft loss deductions. Read the news coming from http://money.usnews.com/money/personal-finance/taxes/articles/2017-01-05/5-signs-you-need-professional-tax-help

For the rest of the support documentation such as paystubs, copies of your tax returns, fund distribution forms, investment records, bank statements, medical bills, and any other support receipts, you can file them for the four year period. When you can safely establish that you will not require them again, you can and should destroy the documentation (an option is to shred them) to protect your private information. However, it is always advisable to keep an electronic file of all your documents for future reference.

Amending Tax Returns After Submission

tax payers

Submitting tax returns by the deadline date always comes with a sigh of relief to many tax payers. However, every now and then – just after making your submission – you may discover that you have made an error on your returns. At times, such errors may include a deduction that could have reduced your taxes or an income you did not include in the returns.

For starters, you cannot correct the tax returns after submission – you carved out your signature under the penalties of perjury declaring that the information was true and final. However, the IRS provides an opportunity to make an amendment to the tax returns submitted. Amendments and corrections may seem more less the same. However, an amendment assumes that information provided initially was true to begin with but you are introducing some new information to affect the returns.

If you find yourself in such a situation where you need to make an amendment, there are various options that you can pursue to handle the situation. These options are explained below:

Wait for the IRS to Complete Processing

If the returns were erroneous due to information you did not have at the time of submitting them, then you are legally not obliged to make an amendment. In other words, if reports of incomes made arrived a day or two after you had made the returns and you were unaware of such incomes, you need not file an amendment. continue reading..

Other errors that will not require an amendment are mathematical errors. The IRS will make the corrections to such errors. This includes wrong entries made on the form. However, if such errors amount to more tax payments, they will add the due amount in your tax account and inform you about such dues. Other errors that the IRS will normally overlook include an unattached schedule, an omitted Form W-2, grammatical errors on the form, and other small omissions and inclusions. In such cases, it is best to wait for the IRS to complete processing the returns before making a decision on whether to file an amendment. If the IRS deems an omitted document as important, they will simply contact you and ask you to mail it to them.

Amendment of Fundamental Information

tax payersIf on the other hand you were aware of fundamental information that you did not include in your tax returns, then you should make an amendment at the earliest time possible. You could have made an income in a given year but may have forgotten to include it in the schedule. As soon as you discover such an error, you should provide an amendment and pay any taxes due at the earliest time possible to avoid an IRS audit that may result in penalties and interests.

Amendments for Tax-Beneficial Corrections

If the information omitted from the tax returns would result in lesser taxes paid, then though filing an amendment is optional, you will want to file the amendment to reduce your due taxes or claim a refund. Visit http://www.irishtimes.com/business/personal-finance/refunds-denied-to-two-taxpayers-overcharged-by-revenue-1.2924582 today!

To make an amendment of your tax returns, you will need to fill out Form 1040X indicating the amendment. The form can be downloaded from the IRS website. However, any refunds due after an amendment will take much longer to process as such amendments are manually reviewed before the refund is released.