How Long to Keep Financial Records

Do you love throwing out unneeded paperwork and other clutter, or are you a packrat? When it comes to your financial records, it’s probably best to be somewhere in between – dispose of records when you can, but not before. How long you should keep financial records depends on the action or event that the document memorializes.

For tax records, you should keep copies of your filed income tax returns permanently, including amended returns. Keep documents that support an item of income, deductible expense, or credit until the statute of limitation has expired for that tax year. The statute of limitations is the period of time within which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax, usually three (3) years. 

The IRS provides more detailed information about the statutes of limitation that apply to income tax return documents:

  1. Keep records for three (3) years after the original filing deadline, unless #4, #5, or #6, below, apply to you.
  2. Keep records for three (3) years from the date you filed your original return or two (2) years from the date you paid the tax, whichever is later, if you file an amended tax return.
  3. Keep records for seven (7) years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. Keep records for six (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.
  5. Keep records indefinitely if you do not file a return.
  6. Keep records indefinitely if you file a fraudulent return.
  7. Keep employment tax records for at least four (4) years after the date that the tax becomes due or is paid, whichever is later.

As usually happens with taxes, there are exceptions. For example, tax-related and other records relating to property should be kept until the statute of limitation expires for the year in which you dispose of the property. You will need these records to figure any depreciation deduction and to figure the adjusted basis and the gain or loss when you sell or otherwise dispose of the property. Records for nontaxable property exchanges should be kept for the old property that you gave up, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property.

Records no longer needed for tax purposes might be needed for another reason. Do not discard them until you check on whether you have to keep them longer for other purposes. For example, your insurance company or creditors may require you to keep some documents longer than the IRS does.

Need more details about whether you’re throwing out too much or you’re being a packrat? The IRS has them for your at

Has It Been Eight Years Already?

This past Monday was the eighth anniversary of quitting my corporate J.O.B. and starting my own business. It wasn’t an easy or quick process. I’ve learned a lot and adjusted my approach along the way based on feedback from clients and other business owners. I’ve benefitted from tenacity and serendipity and achieved my business and personal goals. Plus, I’ve had some fun along the way. The fun is probably why the time has flown by so quickly.

Anniversaries are worth celebrating, as well as the perfect time for reflection. That date on the calendar reminds us to step back to assess our progress, identify areas of potential improvement, and update our goals. Businesses that survive long enough to celebrate many anniversaries are the same ones that invest time and effort on these four activities:

  1. Plan to Meet Defined Objectives

A business plan is a road map to get where you want to go and help to keep your “Eye on The Prize.” Unless you know what you’re reaching for, you can’t grab it. Set your overall objectives and describe the detailed steps to achieve them. Set interim milestones along the way to help measure your progress and keep you motivated.

  1. Execute Your Plan

Actively work through the detailed steps in your plan. It’s exhilarating to achieve goals and move forward. Executing your plan also gives you opportunities to get more information. Use added information to adapt your plan and make course corrections. Also, listen to how your network receives your message and adjust the wording to get your message across better.

  1. Outsource Needs You Can’t (or Shouldn’t) Meet

Be realistic about aspects of your business where you do not have the necessary expertise or can’t take the time away from your core business to do yourself. Legal, accounting, and social media are some areas where engaging an expert can accomplish specialized tasks, free up your time, and prevent you from making costly mistakes.

  1. Give Back

Answering general questions in your area of expertise and presenting at workshops are ways that you can share knowledge with your network and establish your credibility. Sharing tips and perspective helps to create your brand and draw people to you and your business. Being generous is often its own reward, over the long run.

The last eight years of having my own business have been hard work, fun, and rewarding – all at the same time. It takes a lot more than investing in the four activities described above to be successful. But businesses that invest in planning, executing, outsourcing, and giving back increase the chances that they will celebrate anniversaries for years to come.

Is Your Tax Preparer Going to Summer School?

This summer, people are heading to the beach or the mountains for a much-needed break. This July and August, approximately 11,000 tax professionals across the country will take a break, too, from preparing taxes. They’re going to Summer School, aka the annual IRS Nationwide Tax Forum. The IRS puts on the Tax Forum every summer to help tax pros keep up with tax rule changes and federal tax issues affecting their clients.

Why does this matter to you? Because you’d rather be at the beach instead of reading up on tax rules changes. You are responsible for all of the information on your income tax return, no matter who prepared it. Hiring a tax preparer who keeps up with all the tax rules lets you relax at the beach, soaking up the rays.

So, how do you find a qualified tax professional? It’s a good idea to get referrals and interview two or three preparers to feel confident that she or he is qualified and that you feel comfortable interacting with her or him. Also, you can feel confident that your tax return is prepared by a qualified tax preparer who keeps up with all the tax rule changes by following these four tips:

  1. Ask about professional credentials, such as a Certified Public Accountant (CPA) or an Enrolled Agent (EA). Credentialed return preparers are required to fulfill annual continuing education. The IRS maintains a Directory of Federal Return Preparers with their credentials and qualifications at
  2. Verify that the preparer has a Preparer Tax Identification Number (PTIN) and enters it on your return that is electronically filed with the IRS. Tax preparers who charge a fee are required to have a PTIN and to file returns electronically or submit a reason for paper filing with the return.
  3. Inquire about the tax preparer’s education and training, and how she or he keeps up with tax law changes and IRS processes. Tax pros who are not a CPA or EA should still get annual tax updates to keep up their knowledge. 
  4. Ask about service fees and get a cost estimate in writing. Avoid tax preparers who base fees on a percentage of the refund, or who want their fee paid by direct deposit from your refund. These are both unethical practices prohibited by IRS regulations.

Getting dependable tax services starts with selecting a qualified tax preparer who keeps up with tax rule changes and issues. Whether that person went to Summer School, aka the IRS Nationwide Tax Forum, or not, following these four tips will help you to get qualified tax help. 

Want to relax while you’re at the beach knowing that your tax pro is keeping up with tax rule changes? The IRS has help for you to find a tax preparer who might have gone to this year’s IRS Nationwide Tax Forum at

Building Business Credibility by Volunteering

Giving back to the community feels great. Americans have a strong tradition of giving back by volunteering for nonprofit organizations. Nationally, about 30% of us volunteer for a nonprofit. My community, the Washington, DC/Arlington/Alexandria area, tops those averages with 38.3% of residents giving over 148 million hours of service worth an estimated $3.5 billion.

Volunteering not only feels great, it can also build your business credibility. Which would your potential customers choose – a business that is not engaged in the community or your business, which is visibly giving back by sponsoring nonprofit events and allowing employees time to volunteer? The choice is obvious. Customers will choose your business every time because they already feel good about you.

Makes sense, but volunteering is an investment of time and money that needs to fit into the rest of your business. Think about these three ways that businesses can build their credibility by volunteering to see if it fits into your business:

  1. Visibility

Sponsoring a nonprofit event or connecting your team with on-site or virtual volunteer projects is one way to get the name of your business in front of more potential customers. Event sponsorship and volunteering are not free, but if you’re paying to get your business name out there, it may as well be linked with a worthy cause. 

  1. Credibility

When you are doing good, people will assume that you are good, or at least dependable and credible. Establishing your credibility as an honorable and trusted business through volunteering will make potential customers look at your business first when making a purchasing decision. 

  1. Employee Enrichment

More than ever before, employees want a job where they can feel good about what they are doing and contribute to a better future. While workers can certainly volunteer on their own time, businesses that provide opportunities to volunteer as a team increase employee engagement, satisfaction, and retention.

Customers prefer to give their money to businesses like yours, which are visibly giving back to their community. They already feel good about you. Volunteering is a money and time investment in your business that you need to carefully assess. Thinking through the ways you can build your business credibility will increase the likelihood that customers will choose your business over one that is not visibly giving back.

Cyber Risk and Working from Home

Many people are still working from home. Some offices offer a hybrid work option, meaning that even more people are connecting to their employer’s systems remotely. But system security features that are in place at the office don’t always extend to workers’ homes. No small wonder that cyber risk is higher than ever before. 

Hackers know that remote workers often don’t have the same security set-up at home as they do at the office. But even when strong security protocols are in place, hackers can get in and data breaches happen. Why? Because human action has long been reported as one of the highest cyber risks. Temptation to fall for click bait – and trouble – seems to be even higher for people working at home in their jammies.

Cyber risk when working from home can leave employer’s systems vulnerable to hacks and malware. Employers can reduce cyber risk by providing remote support in these four IT control areas:

  1. Firewalls and Anti-Virus Software

Home workers should be required to install a firewall and anti-virus software. Firewalls protect against outside attacks and can be configured to block data from suspicious locations and allow relevant and necessary data through. Anti-virus software scans computer files and memory for patterns that may indicate the presence of malicious software.

  1. Program and System Updates

Home workers should download and install all program and system updates. Skipping updates and patches creates vulnerabilities that can be exploited by hackers and scammers. Workers should set up updates to be pushed automatically to their home computers and other devices to ensure they stay up-to-date.

  1. Passwords and Two-Factor Authentication

Home workers must use passwords for all system access and should be encouraged to use two-factor authentication. Two-factor authentication means the user must enter username and password plus another step, such as entering a security code sent via text to a mobile phone. Passwords used at home should follow the same strength protocols as those used at the office.

  1. Phishing Emails

Home workers should be trained never to open an email from a suspicious source, click on a link in a suspicious email or open an attachment without scanning it first. Otherwise, your worker could be a victim of a phishing attack and your data could be compromised. Workers should not click on links in pop-up windows or follow links that offer anti-spyware software.

More working from home equals increased cyber risk because basic IT controls at the office don’t automatically extend to home, leaving systems vulnerable. Employers must train and support their home workers about these four essential IT control areas to reduce cyber fraud and protect business systems and data. Hackers are looking for workers at home in their jammies to tempt with click bait – don’t let that be you or your workers.

Filing Taxes When a Loved One Dies

That old joke about the two certainties of life – death and taxes – takes on a new meaning when a loved one dies and it’s tax filing time. Losing a loved one is stressful enough. Figuring out that loved one’s tax filing increases the stress for their surviving spouse or representative who is responsible for the final tax return.

Here are four things to know about filing a loved one’s final return:

  1. Filing Status and Due Date
  • The IRS considers someone married for the entire year in which their spouse died, as long as they do not remarry during that year.
  • A surviving spouse may use filing status of married filing jointly or married filing separately in the year of death. Surviving spouses with dependent children may be able to file as a Qualifying Widow(er) for two years after their spouse’s death.
  • The final return is due by the regular April tax date unless the surviving spouse or representative requests an extension to file.
  1. Filing the Final Return
  • On the final tax return, the surviving spouse or representative will note that the person has died to notify the IRS of the death.
  • The surviving spouse or representative should follow efile directions provided by the tax software. 
  • The filer should write the word deceased, the deceased person’s name, and the date of death across the top a paper return. The surviving spouse or representative must sign the return for the deceased taxpayer. The surviving spouse must also sign a joint return.
  • If there’s no appointed representative and no surviving spouse, the person in charge of the deceased person’s property must file and sign the return as “personal representative.”
  1. Documents to Include
  • Court-appointed representatives should attach a copy of the court document showing their appointment. A copy of the death certificate or other proof of death is not needed.
  • Representatives who aren’t court-appointed and are not the surviving spouse must include IRS Form 1310, Statement of Person Claiming Refund Due a Deceased Person to claim any refund.
  1. Paying Taxes Due
  • If tax is due, the filer should submit payment with the return or visit the payments page of for other payment options. 
  • Amounts due that cannot be paid immediately may qualify for a payment plan or installment agreement.

It’s stressful to learn about taxes while you are grieving. Being aware of these four tax-related topics after your loved one dies will help reduce your stress at an exceedingly challenging time. The IRS has more stress-reducing details at

IRS Expands Voice Bot Options for Faster Service

If you’ve tried to call the IRS, you know that “fast service” is not what you are likely to experience. News articles and feeds are full of nightmare anecdotes of being on hold with the IRS, often being cut off before getting through to a real person. Even the Taxpayer Advocate doesn’t have much good to say about IRS phone response rates. They recently reported that only one out of ten calls make it to an agent.

The IRS is under pressure from you and the Taxpayer Advocate to do something about these abysmal response rates. Increased staffing isn’t a viable option, given the tight U.S. labor market and the average age of IRS employees – forty-five percent of IRS workers are within a few years of retirement. So, they are expanding the use of technology, including voice bot options. 

The IRS started using voice bots on many of its toll-free lines in January, enabling taxpayers with simple payment or notice questions to get what they need quickly and avoid waiting. Last week, the Internal Revenue Service announced expanded voice bot options to help eligible taxpayers easily set up or modify a payment plan while avoiding a long wait on hold. 

Voice bots run on software powered by artificial intelligence, which enables a caller to navigate an interactive voice response. Eligible taxpayers who call the Automated Collection System (ACS) and Accounts Management toll-free lines can authenticate or verify their identities through a personal identification number (PIN) creation process. Setting up a PIN is easy using your most recent IRS bill and some basic personal information to complete the process.

Additional voice bot service enhancements will be offered in 2022 to allow authenticated taxpayers with established or newly created PINs to get account and return transcripts, payment histories, and current balances owed. Voice bots can help people who call the Economic Impact Payment (EIP) toll-free line with answers to frequently asked questions. The IRS also added voice bots for the Advance Child Tax Credit toll-free line in February to provide similar assistance to callers who need help reconciling the credits on their 2021 tax return.

Want answers from the IRS with less wait time? Check out more details about your eligibility for IRS expanded voice bot options to avoid long wait times on hold. Live IRS agents are terrifically helpful and nice, but there are fewer of them to serve taxpayers. That makes a voice bot sound like a great option.

IRS Adjusts 2022 Standard Mileage Rates

Gas prices have spiked dramatically since late in 2021, when the IRS announced the standard mileage rates for 2022. The standard rate per mile is determined each year by the IRS based on data about the cost of operating and maintaining a vehicle. Businesses depend on the IRS mileage rate guidelines for deducting vehicle expenses and for reimbursing employees for their personal vehicle use. Individuals may also use the IRS rates to calculate the deductible portion of using their vehicle for medical or moving transportation purposes.

The IRS follows the news just like you do. So, in response to the jump in gas prices, the IRS decided to increase the 2022 standard mileage rates mid-year. Starting July 1, the adjusted 2022 standard mileage rates are:

  • 62.5 cents per mile driven for business use, up 4 cents from the January to June 2022 rate
  • 22 cents per mile driven for medical or moving purposes, up 4 cents from the January to June 2022 rate

The IRS mileage rate changes are optional. However, it makes no sense to use the lower rates for business expense deductions. Businesses who do not raise the rate for employee reimbursements will probably have some very unhappy workers to contend with. 

The 14 cents per mile rate for using a vehicle for charitable purposes stays the same. The charitable rate is set by statute, so it doesn’t change. Another thing hasn’t changed – whether you deduct the standard rate or actual expenses, you must track your miles driven during the year. Most people base their mileage deduction on the standard rate because it’s easier and often results in a larger deduction amount. 

Using the standard mileage rate can really add up to a substantial tax deduction. Remember that you always have the option of calculating the actual costs of using your vehicle and deducting the higher of the two options. No matter which of the two expense methods you choose, you must track your overall mileage driven during the year, and track the miles by category (e.g., business and personal).

Taking vehicle deductions for business, charitable, or medical purposes involves a lot of tracking, but the effort can be worth it. You can use mileage tracking apps to help. Once you get your tracking system down, you’ll see that those mileage deductions can add up and reduce the bottom line on your taxes. And, starting July 1, 2022, those mileage deductions will add up even more quickly.