What records are required to preserve your tax deductions?
As we begin a new year, many people are puzzling over what records they should keep and what they can throw away.
Unlike other areas of our legal system, taxpayers have the burden of proof to substantiate they are entitled to the deductions that they claim on their income tax returns. In other words, we are “guilty until proven innocent” or are required to satisfy the IRS (or other tax authorities) that we entitled to the deductions that we claim.
Basically, we are required to document the Payment and the Purpose for the items that we deduct. This means you shouldn’t throw away your documents immediately after your income tax returns are prepared and filed.
In a blog post, Michael Gray, CPA discusses the various records you should keep to document your tax deductions and how long you should keep those records.
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