By Robert P. Russo, CPA PC
An essential part of tax planning is keeping good records. Having an organized recordkeeping system makes it easier to file a tax return or understand a letter from the IRS. Here are some tips:
Good recordkeeping helps taxpayers in a number of ways, including:
- Identifying sources of income. Taxpayers may receive money or property from a variety of sources. The records can identify the sources of income and help separate business from nonbusiness income and taxable from nontaxable income.
- Keeping track of expenses. Taxpayers can use records to identify expenses for which they can claim a deduction. Tax records help determine whether to itemize deductions at filing. It may also help them discover potentially overlooked deductions or credits.
- Preparing tax returns. Good records help taxpayers file their tax returns quickly and accurately. They should add tax records to their files throughout the year as they receive them to make preparing a tax return easier.
- Supporting items reported on tax returns. If the IRS selects the return for examination or if the taxpayer receives an IRS notice, well-organized records make it easier to provide answers.
In general, taxpayers should keep records for three years from the date they filed the tax return. It is important to develop a system that keeps all their important information together – whether it is a software program for electronic recordkeeping or labeled folders to store paper documents.
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What Records to Keep:
1. Tax-related records. This includes wage and earning statements from all employers or payers, interest and dividend statements from banks, certain government payments like unemployment compensation, other income documents, and records of virtual currency transactions. Taxpayers should also keep receipts, canceled checks, and other documents – electronic or paper – that support income, a deduction, or a credit reported on their tax return.
2. IRS letters, notices, and prior-year tax returns. Taxpayers should keep copies of prior-year tax returns and notices or letters they receive from the IRS. These include adjustment notices (where an action is taken on the taxpayer’s account), Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit. Taxpayers who receive 2025 advance child tax credit payments will receive a letter early next year that provides any payments they received in 2025. Taxpayers should refer to this letter when filing their 2025 tax returns in 2026.
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3. Property records. Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for computing gain or loss.
4. Business income and expenses. For business taxpayers, there’s no particular method of bookkeeping they must use. However, taxpayers should find a method that clearly and accurately reflects their gross income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
5. Health insurance. Taxpayers should keep records of their own and their family members’ health care insurance coverage. If they’re claiming the premium tax credit, they’ll need information about any advance credit payments received through the Health Insurance Marketplace and the premiums they paid. Need help setting up a recordkeeping system that works for you? Don’t hesitate to call.
MEET ROBERT P. RUSSO, CPA PC
As the founder and principal of Russo CPA, P.C, Bob pleasantly surprises clients (plus the IRS and lawyers) with his proactive, caring, and interested approach. Bob’s authentic passion for both numbers and people is why his accounting firm is sought after by everyone from solopreneurs to CFOs. And it’s what energizes his fast-growing team of top CPAs who follow his lead by providing impeccable service to clients – without the CPA geek speak.
The only thing geeky about Bob is his favorite reading material: the latest tax regulations, codes, and rulings (so he can secure every possible tax advantage for his clients). You might mistake Bob for the charismatic entrepreneur and CFO behind an internet travel startup or a visionary real estate developer. That’s because he held those roles during his 30-year career as an accountant, which began at a high-profile accounting firm. While CPAs aren’t required to have “field” experience, the best ones do. But Bob doesn’t define success by his own achievements, it’s what he achieves for his clients. Because of his entrepreneurial past, Bob relates so well to his clients. In addition to serious tax savings most firms would miss, he empowers his clients with real-world accounting and financial insights to increase business.
Bob is even results-driven outside of work, whether it’s finishing the 2012 NYC Iron Man or volunteering for 12 years as President of a kids’ soccer league. While his bottom-line results are always impressive, what matters to Bob are the people who benefit from them.
When he’s not immersed in accounting, Bob is with his family, cooking up elaborate 18-course meals or globetrotting.
Robert P Russo CPA PC
Certified Public Accountants
231 W. 29th Street (bet 7th & 8th Ave)
Suite 500
New York, NY 10001
O: 212-279-9800
C: 917-207-9278
F:866-396-2310
www.robertprussocpa.com
