The Internal Revenue Service (IRS) or the New York Department of Taxation and Finance may send business owners a letter requesting additional information to support tax returns. When this happens, an organized set of records can help to better ensure the process goes smoothly.
What types of records should I keep? Business owners putting together an organized set of records are wise to keep documents that support claimed income, withholding and estimated tax payments as well as documents to support deductions. The following provides a more specific list:
- Business losses. If your business claimed losses, keep records of a Schedule C, Profit or Loss from Business from the federal income tax return for the applicable year. Additional documentation to keep can include a copy of the business license, registration or certification and a summary of documents used to calculate business income and expenses claimed on the return.
- Deductions. Retain a copy of the worksheet used to calculate the itemized deductions and documents to support all the claimed deductions. If received, also keep a copy of Form DTF-973.61, Response to Audit Inquiry.
- Self-employed. For those who are self-employed, retrain a copy of Schedule C, Profit or Loss from Business from the federal tax return along with the business license, registration or certification. Also keep ledgers, spreadsheets, income journals or other documents used to calculate your work expenses and income.
How long should I keep records? A general rule is to keep the records for at least three years after filing, but there are many instances in which you may need to keep records for longer.
What if I get audited? Even with good records, legal representation during an audit is a good idea. The attorneys at Goldburd McCone are experienced with New York tax issues and can help better ensure a favorable outcome.