Tax planning involves a lot of paperwork. From receipts and bank records to previously filed tax returns, many important papers need to be collected and then stacked away securely. When it comes time to file a return, having receipts of expenditures and income statements allows you to calculate taxes quickly and accurately.
Many times, due to lost receipts, taxpayers are unable to take deductions that they qualify for. Without documentation to back up deductions, a taxpayer cannot prove to the IRS that they qualified for them in the first place.
Even if a taxpayer qualified for a deduction, it’s best not to claim it if there is no verifiable record. That is why securely maintaining tax records, including all appropriate receipts and documents, is essential for claiming every deduction that you qualify for.
Researching the tax deductions and credits that you qualify for is also a good idea before preparing your returns. Obviously, keeping separate folders for tax receipts, income statements, and other tax documents can help in organization and convenient retrieval. Effective tax planning is simple enough with a little preparation.