Unlucky 7: The Top Taxpayer Mistakes, Part 5

Here's part 5 of a piece from Money Central that details the top taxpayer mistakes:

Losing track of receipts

In the real world, you either have proof of your deductions, or you lose them. Always keep your receipts and checks if you want to deduct them. Deductible receipts and checks should always be kept for at least three years from the due date of the year filed, or the actual date filed, if later.

Unless the IRS can prove fraud, the statute of limitations to disallow deductions is three years. Once this three-year period has elapsed, the IRS is prohibited from even questioning these deductions. Receipts for expenses that may be deducted in later years, such as improvements to your house, should be kept for three years after the return on which they are claimed.

Remember, the IRS is a paper-based bureaucracy. Separate your receipts and checks by deductible category and make any audit easier for the auditor. The easier you make it for them, the more they believe and accept that you know what you are doing, and the easier they will make it on you.

We start a tax file every year and put every receipt in it. Then when it comes time to do our taxes, everything is in one place.

Click here to read part 6 of this series.

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Comments

[Jesse]

Isn't there some limit below which you don't need a receipt? I thought it was $75.