Assembling and organizing records for tax planning is nobody’s idea of a good time. Assembling the required information can seem daunting, especially if your preferred method of filing is a shoebox in the closet. But with a little persistence and guidance you can begin to gather the pertinent information in a sensible fashion and protect yourself in the event of an (oh no! don’t say it) AUDIT.

Keeping records of tax information is crucial. It is impossible to estimate your taxes without the correct information and after you file your tax return the IRS can ask for the supporting tax documentation up to THREE years after the fact! In cases where they think significant underreporting has taken place (claiming less than 75% of your actual income) the IRS may open an investigation up to SIX years after the return was filed. If the IRS believes that you did not file a tax return at all or that you filed a fraudulent tax return, they can come a knockin’ even decades after the fact.

Least we forget that when the IRS is concerned, the burden of proof to show that you’re innocent is on you – Let’s look at some tax planning tips to help protect ourselves.

Keep all tax estimation information for a single year in one large folder. Break up the folder’s contents by using tab folders and labeling them with sub-headings (i.e. personal property taxes, student loans and tuition, mortgage interest and points etc.)

• Once assembled keep all income, expense and tax records in a safe place for a MINIMUM of three years. Some documents you’ll want to keep even longer.

The following pages offer some easy rules to live by when it comes to what tax records you should keep and how long you should hold on to them.