Why Keep Records?
There are many reasons to keep records. In addition to tax purposes, you may need to keep records for insurance purposes or for getting a loan. Good records will help you:
- Monitor the progress of your business
- Prepare your financial statements
- Identify Sources of Income
- Keep Track of Expenses
- Keep Track of the Basis of Property
- Prepare Tax Returns
- Support Items Reported on Tax Returns
Records You Should Keep
Basic Records:
Basic records are the documents that everybody should keep. These are the records that prove your income and expenses. Basic records should contain documents related to these items:
Proof of Income and Expense
- Income – Form(s) W-2, 1099, K-1, Bank statements, Brokerage statements
- Business income – Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips, form(s) 1099-MISC
- Expenses – Sales slips, Invoices, receipts, cancelled checks or other proof of payment
- Home – Closing statements, purchase and sales invoices, proof of payment, insurance records
- Investments – Brokerage statements, mutual fund statements, Form(s) 1099, 2439
Proof of Payment
- Cash – Amount, payee’s name, transaction date
- Check – Check number, amount, payee’s name, date the check amount was posted to the account by the financial institution
- Debit or credit card – Amount charged, payee’s name, transaction date
- Electronic funds transfer – Amount transferred, payee’s name, Date transfer posted to the account by the financial institution
- Payroll deduction – Amount, payee code, transaction date
Specific Records
- Alimony
- Business use of your home
- Casualty and Theft Losses
- Child care credit
- Contributions
- Credit for the elderly or the disabled
- Education expenses
- Exemptions
- Employee business expenses
- Gambling winnings and losses
- Health savings account and medical savings account
- Individual retirement arrangements (IRAs)
- Medical and dental expenses
- Mortgage interest
- Moving expenses
- Pensions and annuities
- Taxes
- Tips
