In Accounting & Finances,Business,Human Resources,Taxes on April 23, 2012 by Sufen Wang Tagged: accounting, Audit, Credit card, Internal Revenue Service, irs, Tax, tax return, United States
You’re Not Done Yet!
Now that you’ve filed your tax returns, you might be tempted to push your tax documents out of sight, out of mind. That’s not a good idea. Keeping good records after you filed is a good idea, just in case the IRS selects your returns for an audit.
In general, any documents relating to your federal tax returns should be saved for at least three years. This includes bills, credit card receipts, invoices, and any other records that support deductions or credits you claim on your return.
Don’t pull out the shredder for your whole filing cabinet just yet. To be on the safe side, you should keep any and all real estate refinancing loan docs, exchange calculation, escrow closing statements, inheritance or funds gifted to children, trust-related issues, stocks and bond trades, etc. for more than 3 years. Let’s try 5 to 7 years.
Finally, any and all payroll related records should be kept for about 10 years. Yes, you read that right: one whole decade. A few years ago I encountered a case where the State of California Employment Office (EDD) could not reconcile data on an employee, dating back to 1999 and decided to seek out my assistance via an audit. Fortunately, I was able to complete the audit, clean as a whistle, because I had all of the original records on the subject employee.
That just goes to show that employers should make room for keeping records. If you want to save space, go digital and scan all of the employees’ records – but always ensure that their signatures are clear and legible in the scanned images. However you do it, save your records now so you can save yourself some trouble in the future.
On the Record,
Sufen Wang
Wang Solutions
In Accounting & Finances,Taxes on November 6, 2011 by Sufen Wang Tagged: Audit, Budget, Douglas Shulman, Internal Revenue Service, irs, Senate, Tax
Speaking up for the IRS….
Although taxpayers send their returns and payments to the IRS, the agency isn’t exactly rolling in the dough. Yes, the IRS has a budget and, what’s more, it’s in danger of being reduced. Don’t jump for joy yet; less money for the IRS could mean more problems for taxpayers in the near future.
IRS Commissioner Douglas Shulman broke down the implications of a broke IRS in a letter he recently sent to key lawmakers. The IRS budget last year was $12.1 billion: a current House approbation bill wants to cut $650 million from core IRS accounts and a Senate bill proposes a $525 million cut. Shulman stated outright that “These budget cuts will result in a direct increase to the nation’s deficit.”
But how could a decrease in government spending increase the deficit? For starters, “The IRS is unique in that it has a positive return on investment…collecting on average $2.5 trillion per year.” In other words, the IRS is a profit-center not a cost-center. Your tax dollars don’t just magically arrive at the U.S. treasury; there are real people right now who are working to ensure that everyone pays on time. In fact, 92% of the IRS’ enforcement budget is spent on labor and the proposed cuts would reduce staffing, leading to a 5-8 percent decrease in “collection actions taken to recover known unpaid taxes” and consequently, a loss of “$4 billion in revenue annually.”
Closer to home, customer service for taxpayers would also become greatly limited. This means more grey hairs for your practitioners (tax preparers, accountants and CPAs) who are trying to file accurate and timely tax returns. Right now, the normal waiting time for a phone inquiry is between 30 to 45 minutes. Sometimes it’s even difficult to receive an acknowledgement from the IRS that your response to an audit letter has been received. If you think that’s bad, be prepared to never get through to an IRS representative on perpetually-clogged phone lines and to wait five months for a response to your letters. (For tips on how to survive an audit, you can look forward to my e-book: How to Survive an Audit and Other Business Nightmares).
That’s not all folks. Shulman also said the cuts could impact a range of critical, but currently unfunded activities, such as fighting identity theft, cracking down on offshore tax evasion, and processing thousands of offshore asset disclosures. Indeed, the Commissioner said the reductions are serious enough that the IRS will start cutting its spending right away – waiting for enactment would not leave enough time to make the changes needed to adapt.
Here’s the bottom line: as long as the Internal Revenue Code continues to be treated as a social services delivery mechanism by Congress (first-time homebuyer credits, upcoming health care benefits, small business new worker credits, energy efficient equipment credits, etc.), any cuts in the IRS budget are likely to make the work of the tax practitioner more difficult at the same time that practitioner penalties are being increased. The heavy cuts proposed for the current IRS budget will end up costing every taxpayer time and money.
On the Money,
Sufen Wang
Wang Solutions
You’re Not Done Yet!
Don’t pull out the shredder for your whole filing cabinet just yet. To be on the safe side, you should keep any and all real estate refinancing loan docs, exchange calculation, escrow closing statements, inheritance or funds gifted to children, trust-related issues, stocks and bond trades, etc. for more than 3 years. Let’s try 5 to 7 years.
That just goes to show that employers should make room for keeping records. If you want to save space, go digital and scan all of the employees’ records – but always ensure that their signatures are clear and legible in the scanned images. However you do it, save your records now so you can save yourself some trouble in the future.
Wang Solutions 