Paperwork: Should You Keep It Or Shred It?
Courtesy of Tom Ploskanka–
Confused about managing paperwork? Here are some tips that will help you keep what’s important and toss what you no longer need.
1. Tax records. Keep tax records for at least seven years. Tax records include copies of income tax returns, documents supporting your reported income and deductions (W-2s, 1099s, receipts for claimed deductions, etc.) and proof of timely filing. Although the normal statute of limitations for an IRS audit is three years, the open period will double if the agency believes your gross income was understated by more than 25 percent. This six-year period doesn’t begin at the end of the earliest year filed; it starts at the later of the earliest return’s due date or the date it was filed.
2. Miscellaneous. Retain your paycheck stubs throughout the year until you’ve received your W-2 and reconciled it to the stubs. Discard credit card statements after 12 months, unless they support a tax deduction or a major purchase. Keep ATM receipts and bank deposit slips until the transactions show up in your account statement. Do the same with credit card receipts, unless you might return the item or need proof of purchase for warranty or other purposes.
3. Large purchases. Retain records for large purchases as long as you own the items. Records of real estate purchases and improvements should be kept as long as you own the property, plus seven years after disposition. The same is true for records of investments such as stocks and mutual funds, including purchases, dividends, dividend reinvestments, and related expenses.
4. Electronic records. Electronic records are generally considered legally valid, so you can scan tax returns, receipts, and other paper documents and retain them in electronic formats. Store these records as PDFs, on external hard drives, or on a website, but be sure to maintain copies in at least two formats.
Finally, to avoid becoming a victim of identity theft, shred obsolete records rather than tossing them.
Energy Tax Credits Still Available To Savvy Taxpayers
Courtesy of Tom Ploskanka–
Generous tax credits resulting from energy-saving purchases are still available to taxpayers, even after the so-called fiscal cliff legislation passed earlier this year.
On the low end of the spectrum, homeowners can receive a tax credit equal to 10% of the cost to upgrade their windows, doors, and other energy efficient household items. On a grander scale, you can receive a credit for major purchases such as air conditioners, furnaces, biomass stoves, and special metal roofs. The maximum lifetime credit is generally $500, but some items are capped at a lower amount. For instance, windows are maxed out at $200 and furnaces at $150. Air conditioners limit out at $300.
Businesses can also get in the energy tax credit game. Some of the tax perks available include credits for constructing wind, biofuel, or ethanol facilities, as well special vehicle refueling stations and highly efficient appliances. The IRS’s qualifications for these big-ticket items are very specific, so you would be smart to consult a tax professional before launching such a project.
But large-scale energy upgrades aren’t limited to just businesses. Individuals can receive a credit of 30% of the cost to upgrade their home with a qualified geothermal heat pump, solar electricity generator, or wind harnessing device. Eligible costs can include labor and site preparation in addition to the equipment. What’s more, the credit for these types of projects is available for vacation homes too. And there is no lifetime limit, so the bigger project, the bigger the saving. Again, check all the rules to qualify.
Recordkeeping plays an important role in claiming these tax credits, so be sure to obtain all manufacturer certifications for the equipment you buy and keep all records of expenditures made. If an energy-saving project is on your mind, contact our office for the latest rules.
