Kansas City, MO,

Tax Tips Tuesday: Having the Right Documents Makes Filing Accurate Tax Returns Easier

By The Tax Institute at H&R Block

Among the greatest enemies to the success of a business is mismanagement of resources. Maintaining accurate, organized financial records helps small-business owners keep an eye on how much money is coming in, and how much is going out and for what expenses. This type of good recordkeeping is a yearlong task that also can make filing accurate tax returns easier. Now is a good time to make sure you know what documents you will need to file your taxes, which can save you time and money.

The obvious components of good recordkeeping are being organized, and knowing which documents are important to have and how long to keep them. This even applies to small-business owners who leave the preparation of their tax returns to professionals; being knowledgeable about these documents means they will know what documents they need to keep, how long they need to be kept and how to get copies of them if needed.

The envelopes of some important tax documents will actually have “important tax document” printed on the front. But, also be on the lookout for emails from financial institutions, brokers and others notifying you that tax documents are available via their websites.

Small-business owners can use this list to help them begin to compile the documents needed to fill out their tax returns:

  • Prior year federal and state tax returns
    • Keep all business tax returns permanently, along with insurance records and legal correspondence
  • Business income records
    • Keep a record of all income in a ledger book or use a software program
      • If storing your records electronically, make sure the system is compatible with IRS electronic storage system requirements
  • Receipts, invoices and bills documenting business expenses
    • Keep these in addition to credit card statements because they are more detailed accounts of your transactions
  • Mileage log documenting car use for business purposes
    • Keep track of the purpose, date and length of trips
  • Utility bills and records of repairs done to home office
    • Keep track of these expenses because those attributable to the office are business expenses
    • Utility and other household expenses will be deductible based on the percentage of your home used as an office
    • A special safe harbor deduction now allows taxpayers to take a home office deduction of up to $1,500, depending on the square footage of the office, without the need to save receipts to calculate relevant home expenses
  • Health insurance payment receipts
    • Keep these and other documents that substantiate the tax credits and deductions you claim.

Many important tax documents also are delivered to the IRS to ensure accurate income reporting and find audit candidates. Among the documents sent as part of this matching system are forms W-2 (wages), 1099-MISC (self-employment income and other miscellaneous types of income), 1099-INT (interest paid) and 1099-B (sale of stock).

If something shows up in the mail and you are not sure if you will need it in April, save it because a tax professional can help you know exactly what you need based on the type of business you operate.

Need somewhere to store important tax-related documents? My H&R Block is a free, online “filing cabinet” that gives taxpayers a place to store their tax-related documents so they have easy access to them for tax prep, checkups and planning year-round. My H&R Block also makes it easy to view and print past returns, and check e-file status.

For more information about filing an accurate tax return, contact a local H&R Block tax professional.

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Gene King, APR
Director Corporate Communications
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