Tuesday, 3 January 2012

Keep track of your tax return!

You may prepare your tax return yourself, use a tax software, take the help of a CPA or a tax professional or may be you outsource it. However, my question is, do you save a copy of your return?

Most of us do not, and that is a very serious mistake. Why would you need to save a copy of your tax return? The chances are,

Ø      You may have to respond to an IRS notice
Ø      You  may want to make changes to the prepared return
Ø      You may be applying for a home loan
Ø      You may want to plan in advance for your tax and finances.

For all the above cited reasons, one may think taxpayers will be careful around their returns. But alas, the situation has only gone from bad to worse these days.

Suppose you have prepared your own return and filed it online – please take care to do at least any of the following:

  1. Print a copy of the return
  2. Save the file or
  3. Scan the return document (if not the source documents)

Some of you might argue saying that you source your returns to a paid preparer, and the preparer will be available to give you a fresh copy if need be. But, in case the preparer experiences a PC crash and loses the files or has quit the business, you will be helpless.

The Federal Tax office can provide you with a copy of the return, but you will have to shell out a few extra dollars and be prepared to wait for a few weeks. IRS Form 4506 is the form to apply for a copy / transcript of your tax return.
It is in fill-in mode, allowing you to enter information while the form is displayed by an Adobe Acrobat 4.0 product and then print the completed form out. Fill-in forms give you a cleaner crisper printout for your records and for faxing. Of course, take due care to print it out and save your copy!
 You can also avail of a tax account transcript / return transcript from the IRS– however, the waiting time involved is sure to dent the original purpose of requiring the return.
Many people do NOT need actual copies of their returns and can instead request a tax return transcript. Transcripts are free, but copies of the return cost $23 each. In addition, transcripts are usually received in two weeks, but copies take four to six weeks.

Hence, please take care to save a copy of your return always, and store it for a minimum period of 5 years from the time of filing. A bit of preparedness always helps!

Along side, maintaining a digital copy of your supporting documents is also a best practice and will come in handy some day.

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