5 Reasons You Should Back Up Your Tax Records Now
Recently, the IRS reminded taxpayers about the National Preparedness Month (September). It highlighted reasons for backing up tax records, especially now since some parts of the country will be vulnerable to natural disasters in the coming months. A natural disaster can destroy more than just your personal property, your tax records, too, are vulnerable.
In this article, I will share 5 reasons you must use this period to back up your tax records, and how. This will transcend natural disaster-related reasons because there are more reasons you should do this. Let’s get straight into it.
- In the event of a natural disaster
Typhoons and wildfires don’t usually ring a warning bell weeks before they come down in your area. Sometimes you just hear something is going down back home when you are deep in a meeting. By the moment you get back home, you may find nothing but ashes or a gigantic pile of rubbles.
When this happens, there is not much you can do to save your property and what was in it. This includes your tax paperwork. Tax records or paperwork include small items such as receipts to bigger paper sizes such as contracts and other invoices.
They must be backed up in all these shapes and sizes. If not, the natural disasters mentioned above will destroy them.
That is why you should keep them in a safe, and fireproof place or safe in your home. You must also take photos of each of them and upload them to an online folder.
You could be wondering how you can do this with smaller receipts. Well, you can staple them on an A4 sheet and take photos. Just make sure the sheets are in their own file, arranged from the oldest transaction date to the newest.
- In the event of theft and burglary
Besides natural disasters, you may fall victim to burglars. And when they come to your home, they will be usually in a hurry. A thief in a hurry will lift anything closer and easy to carry. This could include your safe if it is small and accessible.
It’s natural for burglars to target your safe because that’s where the money usually is. But remember, you may also keep important documents therein, such as contracts and receipts of valuable purchases with a long-term warranty.
So, imagine having installed new solar equipment in your home. But as you were waiting to claim the tax credits recently approved, someone breaks into your home, and takes the safe with all the receipts to back up your purchases. You may lose these thousands of dollars in tax credits.
That’s why you need to back up your tax records online to avoid such losses from happening.
- It can help protect your identity and personal information
I already mentioned how people may break into your home and steal tax documents. Some of these contain sensitive information such as your name, images, credit card numbers, mailing address, and more.
If this information falls in the wrong hands, it can be sold to some people who may steal your identity. We have heard about many people whose children were claimed by someone, or whose names were used to take credit cards. This can destroy you in many ways.
Therefore, when you take backing up your tax data seriously, you naturally put safety measures to protect yourself. These may include keeping data in an unbreakable safe at home, big enough for burglars not to carry it outside.
You also make use of online tools or clouds, protected with very strong passwords. You may also keep other sensitive information away from your home, at places with very high security such as banks (security deposit boxes). But this could cost you, so make sure that it is in your best financial interest.
- The next tax season is just around the corner
We are fast approaching the final quarter of the year. This means the 2022 tax season will start in a matter of just over 100 days! Filing a tax return successfully is all about having the correct documents in place.
And, as I have grown to know during more than ten years of dealing with taxes, you can never gather tax paperwork at the last minute and get it right. You will make a mistake and probably end up being penalized. Worse, you could be on the IRS’ radar if they suspect wrongdoing, which could lead to an audit.
Therefore, the only protection against making mistakes this way is to gather paperwork all year round. This includes now. You cannot wait until the IRS reminds you that it is a National Preparedness Month. We live and transact on items that affect our taxes daily. It will be wise to back up your records every week.
- You need records to claim all deductions and credits
We all like to listen to how we can save money on taxes, which is great. But to save money on taxes, you would have claimed as many deductions as possible. You would have also qualified for various tax credits.
When this happens, the IRS may naturally want to know whether you really deserve these benefits or not. Their usual way of finding out is by asking for proof, which is the paperwork. Without it, your claims could be thrown out.
So, if you plan to save money on taxes this year, make sure you have a tax planner. If you don’t have them, hire me by vising this link. Secondly, make sure all your deductions are backed up with paperwork.
Conclusion
Finally, I mentioned taking pictures and uploading tax records online. I understand we live in a mobile era. Many of us trust our high-end mobile phones to take such images. When you do, please remember to delete these pictures from your phone. Phones are vulnerable to theft or can be lost. You don’t want someone to get hold of your sensitive information through these undeleted images.
If you need any help or advice on keeping tax paperwork, contact me now. You can also contact us for tax planning to ensure you are eligible for many deductions and credits. Let us help you save money on taxes. Contact me now.
Frequently Asked Questions
- How do I find my tax records?
You can find some past tax records through your IRS online profile. But the records you need for the upcoming tax filing seasons are those you are currently generating, for example, receipts and contracts. So, as you transact and get into deals, keep all the paperwork.
- How many years of tax records should I keep?
Tax records should be kept not only for the upcoming tax season but the past ones too. Therefore, keep tax records for at least 3 years after filing a tax return. In some cases, the IRS may need records of up to 7 years, for example, if you file a claim for a loss from worthless securities or bad debt deduction.
- Can I get my tax information online?
Yes, you can get it through your IRS online profile. Go to IRS. Gov and navigate to “Sign In To Your Account”.
- Is there any reason to keep old tax returns?
Yes, you should keep tax records indefinitely if you have never filed a tax return. Or you should keep them for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
