A well-organized system for your records will make it easier to prepare your tax return and will also help you answer questions if your return is selected for examination, or if you are billed for additional tax.

Records such as receipts, canceled checks, and other documents that support an item of income or a deduction appearing on your return should be kept until the statute of limitations expires for that return. Usually this is three years from the date the return was due or filed, or two years from the date the tax was paid, whichever is later. There is no statute of limitations when a return is false or fraudulent or when no return is filed.

You should keep some records indefinitely, such as property records, since you may need them to prove the amount of gain or loss if the property is sold. Generally, income tax returns should be kept for a three-year period. They will help you prepare future tax  returns and amended returns. For more information on record keeping requirements for individuals, order Publication 552 Record Keeping for Individuals.

If you are an employer, you must keep all your employment tax records for at least four years after the tax is due or paid, whichever is later.

If you are in business, there is no particular method of bookkeeping you must use. However, you must use a method of bookkeeping that clearly reflects your income and expenses. People in business often have expenses for travel, entertainment, gifts, and cars.

The documentation you should keep for each of these expenses can be found in Publication 583, Starting a Business and Keeping Records; Publication 463, Travel, Entertainment, Gift, and Car Expenses. Publications can be ordered by calling 1-800-829-3676.

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