It’s time to start thinking about your 2011 tax return. Changes to the tax code are never simple, and figuring out how to take advantage of tax breaks can be tricky. This year, new additions to reporting requirements make it especially important to consult your tax professional before making any irrevocable decisions.

Here are some of the key points:

• This year, a new form – 8949 – debuts alongside the familiar Schedule D – Capital Gains and Losses. If you had taxable sales from stocks, mutual funds, securities or other capital assets including vacation homes or land investment, you will be required to fill out Form 8949 – Sales and Other Dispositions of Capital Assets. Because new disclosure requirements for securities brokers came into effect last year, sellers of certain securities that were sold in taxable accounts must identify which gains or losses came from securities covered by these new reporting requirements and which gains and losses came from securities that are not affected by these new rules. For the most part, the securities covered by the new broker disclosure rules are:
• Common stock acquired and sold in 2011;
• Mutual fund shares acquired and sold in 2011, if all the shares were acquired as a single block.

You will know which transactions need to be outlined on Form 8949 because you will receive information from your broker – Box 3 in Form 1099-B – which tells you if the gain or loss from a 2011 sale of a covered security was short- or long-term. Any sales of non-covered securities will be indicated in Box 6 by a checkmark on the same form.

Non-covered items include:

• Common stock and mutual fund shares acquired before 2011;
• Common stock acquired through a dividend reinvestment plan in 2011;
• Mutual fund shares acquired in 2011 if several blocks were acquired on different dates.
• The implications of this new mandatory reporting are important. Brokers are required to send copies of every 1099-B they send to their clients to the IRS, too. When you submit your 2011 return, the data on your Form 8949 can be cross-referenced easily by the IRS with brokers’ submissions. It is especially important to avoid mistakes or omissions on your 8949.
• This year’s deadline is Tuesday, April 17. The filing deadline, April 15, falls on a Sunday this year. Normally, the deadline would then be the following day, which is Monday, April 16, but this happens to be Emancipation Day, an observed holiday in Washington, D.C. If you think you need more time to get your return ready and a couple of days is not going to make sufficient difference, file an extension request to the IRS using Form 4868 on or before April 17.

The above are just some of the many changes taxpayers will face this year. For specific advice on your tax situation, consult your tax professional.

 

FOR BUSINESSES
DOCUMENT	RETENTION PERIOD
Accounts Payable – Ledgers and Schedules	7 years
Accounts Receivable – Ledgers and Schedules	7 years
Audit Reports of Accountants	Permanently
Bank Reconciliations	3 years
Capital Stock and Bond Records	Permanently
Cash Books	Permanently
Checks (canceled in general)	7 years
Checks (canceled for important payments, taxes, property purchases, special contracts, etc. – file with papers of related transaction	Permanently
Contracts and Leases (expired)	7 years
Contracts and Leases Still in Effect	Permanently
Correspondence, general	3 years
Correspondence, legal and important matters only	Permanently
Deeds, Mortgages, Bills of Sale	Permanently
Depreciation Schedules	Permanently
Duplicate Deposit Slips	3 years
Employee Expense Reports/Personnel Records (after termination)	7 years
Employment Applications	3 years
Financial Statement (end of year)	Permanently
Freight Bills, Bills of Lading	7 years
Garnishments	7 years
General Ledgers	Permanently
Insurance Policies (expired)	7 years
Insurance Records (accident reports, claims, policies, etc.)	Permanently
Inventory Listings and Tags	7 years
Invoices	7 years
Patent/Trademark Papers	Permanently
Payroll and Purchase Journals	Permanently
Property Appraisals by Outside Appraisers	7 years
Tax Returns and Worksheets	Permanently
Time Cards and Reports	7 years

FOR INDIVIDUALS
DOCUMENT	RETENTION PERIOD
Alimony, Custody, Prenuptial Agreements	Permanently
Bank Statements	3 years
Birth and Death Certificates	Permanently
Canceled Checks	3 years
Certificates of Deposit Statements	7 years
Charitable Contributions	Keep with tax return
Employee Business Expense Reports	Keep with tax return
Forms 1099 Received	7 years
Forms W2 Received	Permanently
House Records (mortgage and repairs)	Permanently
Income Tax Return Record	Permanently
Insurance Policies	Keep until expiration
List of Financial Assets	Permanently
Major Purchase Receipts	7 years
Medical Records	7 years
Wills, Trusts	Permanently

FOR BUSINESSES
DOCUMENT	RETENTION PERIOD
Accounts Payable – Ledgers and Schedules	7 years
Accounts Receivable – Ledgers and Schedules	7 years
Audit Reports of Accountants	Permanently
Bank Reconciliations	3 years
Capital Stock and Bond Records	Permanently
Cash Books	Permanently
Checks (canceled in general)	7 years
Checks (canceled for important payments, taxes, property purchases, special contracts, etc. – file with papers of related