The boring side of taxes - recordkeeping & substantiation

This tax advice is for you.

Yes, you.

Here’s the catch.

It’s really BORING. It’s sooo boring that you’ll probably stop reading even though I can PROMISE you it will save you money. Possibly LOTS of money.

Here we go:

Keep. Adequate. Records.

Seriously.

While business owners who’ve been through an IRS exam know to keep revenue & expense records, where I’m specifically seeing this at the moment is real estate cost basis. This is a property that has been in a family for nearly 100 years. Across multiple decades & generations, property improvement records were not kept While some amounts are allowed to be estimated and some amounts can be derived from county records, these won’t cover everything. Which means a lower cost basis, which means a higher taxable gain, which means literally THOUSANDS of tax $$ paid - likely unnecessarily - due to unsubstantiated costs.

Adequate records:

• Can be kept electronically

• List amount, date, items/services purchased

• Include receipts, bank & credit card statements, 1099s/W2s

• Include purchase, improvements, and other costs for real estate

• Should be kept for as long as you possibly can hold onto them. The IRS will tell you a certain # of years depending, but my experience is that clients need them longer.

Boring message, serious dollars.