Publication 552 |
2000 Tax Year |
Why Keep Records?
There are many reasons to keep records. In addition to tax
purposes, you may need to keep records for insurance purposes or for
getting a loan. Good records will help you:
- Identify sources of income. You may receive money
or property from a variety of sources. Your records can identify the
sources of your income. You need this information to separate business
from nonbusiness income and taxable from nontaxable income.
- Keep track of expenses. You may forget an expense
unless you record it when it occurs. You can use your records to
identify expenses for which you can claim a deduction. This will help
you determine if you can itemize deductions on your tax return.
- Keep track of the basis of property. You need to
keep records that show the basis of your property. This includes the
original cost or other basis of the property and any improvements you
made.
- Prepare tax returns. You need records to prepare
your tax return. Good records help you to file quickly and
accurately.
- Support items reported on tax returns. You must
keep records in case the IRS has a question about an item on your
return. If the IRS examines your tax return, you may be asked to
explain the items reported. Good records will help you explain any
item and arrive at the correct tax with a minimum of effort. If you do
not have records, you may have to spend time getting statements and
receipts from various sources. If you cannot produce the correct
documents, you may have to pay additional tax and be subject to
penalties.
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