Are you hoping that the shoebox of receipts, bank statements and other random papers in your closet is enough documentation for your taxes? There is always a lot of confusion around what important documents need to be kept for taxes. We’re here to help you keep what you need and throw away the rest. Our quick guide will help you determine what’s important for your personal and business taxes. We even have a few storage method suggestions because heaven help you if anything happens to that shoebox!
Important Documents for Personal Taxes
There are quite a few documents you’ll want to save for your personal taxes. The top of the list is going to include statements that you get on a regular basis.
- Bank Statements
- Credit Card Statements
- Mortgage Statements
- Investment Statements
You’ll get most of these on a monthly or quarterly basis – don’t throw these out! Keep them because you’ll want them when it comes time to prepare your taxes. Most of these can be obtained electronically. This is a great option if you’re prone to losing random pieces of paper, which, let’s be honest, who isn’t. Download those statements and save them in a file on your computer and then you will know where they are come tax season.
Next, you’ll want to keep track of how you spent money that could be tax deductible.
- Charitable Donations
- IRA Contributions
- Health Care Costs
- Life Insurance Payments
You should keep receipts or statements regarding these expenses to help your accountant find the most deductions for you.
Finally, you’ll want to hold onto any important documents that show you had a major life event.
- Marriage Certificate
- Divorce Papers
- Birth Certificate for children
- Home Purchase Documents
All of these are significant life events that can change your tax bill. Make sure you let your accountant know about them so they can file your taxes correctly.
Important Documents for Business Taxes
Business taxes also require documentation for any tax deductions you wish to take. You’ll need to save basic documents, just like you did for your personal taxes.
- Bank Statements
- Credit Card Statements
These are all important for your tax returns, so save them in a safe place in your office.
Next, you’ll want to make sure you save receipts for things you plan to take a deduction on.
- Travel Expenses
- Business Meals
- Giveaway Purchases
- Transporation Costs
- Petty Cash Receipts
- Advertising Costs
- Office Supplies
All of these are tax-deductible, but you need to be able to prove that you used them for business. It’s really helpful to make a note of what the receipt was for. For instance, if you took a client out to lunch, then you could make a note of the client’s name and what you discussed. A great way to do this is to tape the receipt to a piece of paper and write what you did on the paper. Then scan the paper into your computer and file it away so you have it when it’s time to do your taxes.
Finally, you’ll want to keep track of these expenses that are specific to businesses.
- Payroll Records
- Asset Records
- Property Costs (Rent or Mortgage)
These are all very important for business taxes because they can help keep your tax bill lower. The assets can roll over from year to year, so make sure you keep your records up to date.
How Long Do I Need to Keep Important Documents For?
We recommend keeping your important records for a minimum of three years. The IRS requires that you keep records for at least three years after the due date of the tax return or the date you filed the tax return, whichever is later. The period of limitations to file an amendment is three years; however, the IRS can audit you up to six years later.
You can either bookmark (or pin) this post or you can grab the helpful printable, The Important Documents You’ll Want to Save to Prepare Your Taxes, so you know what you’ll need when it comes time to prepare your taxes.
Ben Sutton is the founder of Mazuma USA, an accounting firm providing tax, bookkeeping and payroll services to small businesses. Since founding Mazuma, Ben has established himself as an expert in the small business world. He’s still driven by that same desire to provide accounting help to all small businesses – from photographers, bloggers and creatives to lawyers, doctors, and dentists, everyone needs affordable accounting help. Ben is a Certified Public Accountant, and a member of the American Institute of Certified Public Accountants. But Ben considers his greatest achievement and credential to be his happy wife and four children.