KRD FAQs

• What tax records do I need to retain and for how long?

The statue of limitations for the IRS is 3 years from the due date of the tax returns.  We generally say 4 years.  However, if you filed late, it is 3 years from filing and if you have not filed a return the statue of limitations stays open forever.

For day to day business records it is generally 7 years.  However, for retirement plan documents, property records, contracts insurance policies, patents and corporate books and records, it is suggested that these be retained permanently.

For your personal residence it is suggested that you retain purchase records and receipts related to improvements for 10 years after the sale.

• What is the best way to document auto mileage?

Maintain a contemporaneous journal showing date, place, client, business purpose and mileage.

• What do you do if you don’t have an auto mileage journal?

Look at your daily calendar.  Go to one of the on-line map services, put in the addresses and have the mileage computed.

• If I don’t own the vehicle, can I still take the mileage?

Yes.  You can use the standard mileage allowance.

• What kind of documents do I need to give my tax preparer to make the process as easy as possible?

You should prepare a summary of your expenses by category and the details of your income.  You need to maintain the original record for three years from the filing of your tax return.  The better your organization the more your tax preparer can control the costs.

• What kind of expenses can you deduct under Schedule C?

The following lists some of the allowed Schedule C expenses: advertising, car and truck expenses, commissions and fees, contract labor/outside services, depreciation, employee benefits, insurance, business interest expense, accounting, legal, office expenses, pension and profit-sharing, rent, vehicle lease expense, repairs and maintenance, supplies, taxes and licenses, travel, meals and entertainment, utilities, wages and salaries, insurance, dues and subscriptions, telephone, computer services, licenses, professional development and parking for business.

• What happens if I haven’t done any expense reporting all year? How do I catch up?

Review your credit card statements, bank statements and any other receipts.  Reviewing your daily calendar may refresh your memory.