DIY Mid-Year Tax Tune-Up

Save on Taxes is on computer key

July 1 is the 182nd day of the year and it’s an ideal time to conduct a Do-It-Yourself (DIY) tax tune-up to ensure proper record-keeping practices will make tax filing easier, faster, and generate more tax deductions.

10 Record-Keeping Checks

Essentially, a mid-year DIY tax audit is an exercise in record-keeping and retention. The emphasis is on ensuring tax-related documents are being stored, and are available. Organizing tax records now can make filing easier and faster when April 15th of the next year rolls around.

The tune-up is also a good opportunity to determine if there are potential deductions being overlooked — such as medical/dental expenses — and if those records and receipts should be included among tax-related documents.

Here are 10 tune-up essentials for a mid-year DIY record-keeping audit:

  • Keep documents that prove income and expenses, such as Forms W-2 and 1099. Have Social Security numbers and other information that confirm the identity of dependents listed on tax returns.
  • Keep documents that support tax credits or deductions, such as sales slips, credit card receipts, proofs of payment, invoices, canceled checks, bank statements and mileage logs. This is a good time to assess if there are records and receipts that can be collected to support deductions previously not claimed, or that previously may not have been available.
  • Keep records and receipts related to property taxes, such as mortgage interest documents, improvements and, if applicable, expenses related to sustaining a home-based business.
  • Keep any documents related to investment properties, including those related to purchase, improvements, repairs and depreciation.
  • Keep documents related to support of a full-time student who is claimed as a dependent.
  • Keep any receipts from job-related travel expenses that were not reimbursed.
  • Keep any and all receipts and records of expenses incurred in a job search, including costs associated with moving to a new city to begin a new job or because of a transfer.
  • Business owners should retain receipts, proof of purchase, and other expenses and assets, including cash register tapes, bank deposit slips, receipt books, purchase and sales invoices, credit card receipts, sales slips, canceled checks, account statements and petty cash slips. Also keep electronic records, such as databases, saved files, emails, instant messages and faxes.
  • Investment property owners should keep records of purchase, improvements, rental payments, and any related receipts.

The Six-Year Rule

The IRS recommends taxpayers keep these basic records on hand for at least three years. Business owners with employees should keep all employment-related tax records for at least four years after the tax is due, or after the tax is paid, whichever is later.

Most tax professionals suggest maintaining these documents — including all previous year tax returns — in a safe, accessible place for at least six years.

For more suggestions and tips regarding record-keeping for individual taxpayers, see IRS Publication 17. Business owners can consult IRS Publication 583.

We have provided the following resource if you are missing any important documents as you are doing your DIY Tune Up: