Good recordkeeping year-round helps taxpayers avoid tax time frustration

Tax Tip 2022-183

Wading through a pile of statements, receipts and other financial documents when it’s time to prepare a tax return can be frustrating for people who haven’t managed their records. By knowing what they need to keep and how long to keep it, people can develop a good recordkeeping system year-round and make filing their return easier.

Good recordkeeping can also help taxpayers understand their situation when they receive letters or notices from the IRS.

Good records help:

• Identify sources of income. Taxpayers may receive money or property from a variety of sources. The records can identify the sources of income and help separate business from non-business income and taxable from nontaxable income.
• Keep track of expenses. Taxpayers can use records to identify expenses for which they can claim a deduction. This will help determine whether to itemize deductions at filing. It may also help them discover potentially overlooked deductions or credits.
• Prepare tax returns. Good records help taxpayers file their tax return quickly and accurately. Throughout the year, they should add tax records to their files as they receive them to make preparing a tax return easier.
• Support items reported on tax returns. Well-organized records make it easier to prepare a tax return and help provide answers if the return is selected for examination or if the taxpayer receives an IRS notice.

In general, taxpayers should keep records for three years from the date they filed the tax return. Taxpayers should develop a system that keeps all their important information together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.

Records to keep include:

• Tax-related records. This includes wage and earning statements from all employers or payers including payment apps or cards, such as Form W-2, 1099-K, 1099-Misc, 1099-NEC. Other records include interest and dividend statements from banks, certain government payments like unemployment compensation, other income documents and records of virtual currency transactions. Taxpayers should also keep receipts, canceled checks, and other documents that support income, a deduction, or a credit reported on their tax return.
• IRS letters, notices and prior year tax returns. Taxpayers should keep copies of prior year tax returns and notices or letters they receive from the IRS. These include adjustment notices when an action takes place occurs on the taxpayer's account.
• Property records. Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for computing gain or loss.
• Business income and expenses. Business taxpayers should find a bookkeeping method that clearly and accurately reflects their gross income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
• Health insurance. Taxpayers should keep records of their own and their family members' health care insurance coverage. If they're claiming the premium tax credit, they'll need information about any advance credit payments received through the Health Insurance Marketplace and the premiums they paid.

Sure Financials and Tax Services LLC

Phone:+1.908.300.9193, Fax:+1.855.753.0066

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Tax Tips: Income Tax Credit for Qualified Plug-in Electric Driven Motors

Qualified Plug in Electric Drive Motor Vehicles, including Passenger Cars and Light Trucks, are eligible for a credit under Internal Revenue Code Section 30D.   

For qualifying plug-in electric drive motor vehicles that you put into service during your tax year, use Form 8936 to calculate your credit.   

From $0 to $7,500, this non-refundable credit is available. 

• The eligibility for the electric drive motor credit tax credit is determined by Internal Revenue Code 30D (a). 
• Passenger cars, light trucks, and two-wheeled vehicles can all use this credit. 
• For a manufacturer who sold more than 200,000 qualifying four-wheeled electric plug-in vehicles, the tax credit phases out. To find out which manufacturer is being phased out, visit https://www.irs.gov/businesses/irc-30d-new-qualified-plug-in-electric-drive-motor-vehicle-credit.
• Form 8936, entitled "Qualified Plug-in Electric Drive Motor Vehicle Credit," must be completed by the taxpayer. The 01/2022 revision of this form. 
• The brand-new four-wheel vehicle ought should 
• primarily driven by an electric motor that gets power from a battery with a minimum capacity of 4 kilowatt hours and the ability to be replenished by an external power source, and 
• a vehicle with a gross weight under 14,000 pounds. 
• manufactured with public streets, roads, and highways in mind. 
• The brand-new two-wheel vehicle ought should 
• capable of accelerating to a speed of 45 mph or more, 
• primarily driven by an electric motor that receives power from a battery with a minimum capacity of 2.5 kilowatt hours and the ability to be recharged by an external power source, and 
• a vehicle with a gross weight under 14,000 pounds. 
• The taxpayer 
• must be the vehicle's owner. Only the lessor, not the lessee, is eligible for the credit if the car is leased. 
• The car must be put into use during the tax year. 
• Must the first owner of the vehicle 
• purchased the automobile not for resale, but for personal use or to lease to others. 
• must primarily utilize the car in American soil.