With the IRS adding 87,000 employees, and many of these employees being assigned to compliance, the fact is you are going to be seeing more audits and more additional information requests for IRS.
While this may make many taxpayers nervous, worrying will not help. Instead, it’s important to get in the habit of documenting the items you claim on your tax returns.
For business owners this means keeping invoices and receipts, as well as making sure your accounting records show who you paid and why you paid them.
While you can download information directly from your bank to your accounting software with amounts it often does not include payee information or classification. Good accounting records require both. Sales journals need information showing who as well as how much and how payment was received.
Auditors will want more than just bank statements should an audit occur. Remember auto expense deductions also require mileage logs. Meals also require documentation as to who, what, where, and when along with a notation as to what business was discussed.
For individuals, it’s important to track income that is not reported on a W2 or 1099 such as tips. If you itemize you also need written receipts for charitable deduction of $250 or more and documentation for medical expenses, along with proof of taxes paid.
Need help understanding the records you need to keep? Speak to your tax professional and let them guide you. Tax pros can do more than just completing your tax return.
