According to the IRS, here are the guidelines on how long to keep tax records:

Keep Tax Returns Forever

• If you filed a fraudulent return, keep your tax returns forever.
• If you did not file a return, keep your tax records forever.

Keep Tax Returns for 7 Years

• If you claimed a worthless security loss or deducted a bad debt, keep your tax records for 7 years.

Keep Tax Returns for 6 Years

• If you grossly underreported your taxable income (more than 25% of the gross income on your return), keep your tax return for 6 years.

Keep Tax Returns for 3 Years

• If the above don’t apply, keep your tax returns for 3 years.
• If you filed an amended tax return, keep your tax return for 3 years or 2 years from when you paid the tax if it’s later.

Other Tax Records to Keep

In addition to keeping your tax return, you’ll also need to keep information that supports those tax returns including:

• Canceled Checks
• Credit Card Statements
• Old Bank Statements
• Retirement Plan Contributions

You can also see how long to keep records for the retention length of other papers and records.

How Long Should I Keep Old Tax Returns?

What’s the bottom line? If the IRS can audit you indefinitely for not filing a return, you’re going to have to prove that you did. In addition, it would be hard to prove you didn’t file a fraudulent return if you didn’t keep the supporting tax documents.

Therefore, we keep all of our tax returns and tax records forever. If you really want to throw them out, be sure you keep your tax returns for 7 years.

• How to Make Payments. To make your payment, you can use the paper Form 1040-ES or you can use the IRS EFTPS electronic payment system.
• Who Needs to Make Payments. For guidelines on who needs to pay estimated tax payments, see the estimated tax payment details.
• Payment Due Dates. All of the quarterly estimated tax payment due dates can be found in the 2009 Tax Calendar.

There seems to be a lot of confusion around the tax rules for the Cash for Clunkers program which ended this week. One of the tax rules currently being debated is whether or not you need to pay federal income tax on the value of the cash for clunkers program voucher.

Here is the federal income tax rule from the official Cash for Clunkers government website:

(h) Exclusion of Vouchers From Income
(1) FOR PURPOSES OF ALL FEDERAL AND STATE PROGRAMS- A voucher issued under this program or any payment made for such a voucher pursuant to subsection (a)(3) shall not be regarded as income and shall not be regarded as a resource for the month of receipt of the voucher and the following 12 months, for purposes of determining the eligibility of the recipient of the voucher (or the recipient’s spouse or other family or household members) for benefits or assistance, or the amount or extent of benefits or assistance, under any Federal or State program.

(2) FOR PURPOSES OF TAXATION- A voucher issued under the program or any payment made for such a voucher pursuant to subsection (a)(3) shall not be considered as gross income of the purchaser of a vehicle for purposes of the Internal Revenue Code of 1986.

So there’s your answer. The voucher is not subject to federal income tax.

For more information, including state tax information, see Cash for Clunkers Tax Rules and the Cash for Clunkers Business Tax Rules.

Alabama

• Date: August 7-9
• Savings: 4%

Connecticut

• Date: August 16-22
• Savings: 6%

Georgia

• Date: July 30 – August 2
• Savings: 4%

Iowa

• Date: August 7-8
• Savings: 6%

Louisiana

• Date: August 8-9
• Savings: 4%

Mississippi

• Date: July 31 – August 1
• Savings: 7%

Missouri

• Date: August 7-9
• Savings: 4.225%

New Mexico

• Date: August 7-9
• Savings: 5% to 8.5625%

North Carolina

• Date: August 7-9
• Savings: 7%

Oklahoma

• Date: August 7-9
• Savings: 4.5%

South Carolina

• Date: August 7-9
• Savings: 6%

Tennessee

• Date: August 7-9
• Savings: 8.5% to 9.75%

Texas

• Date: August 21-23
• Savings: 6.25% to 8.25%

Vermont

• Date: August 22
• Savings: 6%

Virginia

• Date: August 7-9
• Savings: 5%

West Virginia

• Date: September 1 – November 30
• Savings: 6%

Source: Guide to State Sales-Tax Holidays 2009

For example, a single filer who has $25,000 of taxable income will pay 10% on the first $8,350 ($835) and 15% on the remaining $16,650 ($2,497.50). The total tax will be $3332.50, or an average tax rate of 13.3%.

2009 Tax Brackets

It’s important to note that the Make Working Pay Tax Credit will reduce some of the the tax due in the 10% tax bracket.

Tax rates are marginal, so you’ll pay taxes at each rate until you reach your taxable income level.

For example, a single filer who has $25,000 of taxable income will pay 10% on the first $8,025 ($802.50) and 15% on the remaining $16,975 ($2,546). The total tax will be $3349, or an average tax rate of 13.4%.

2008 Tax Rates

Recent tips that caught my eye included:

• Ten Things You May Not Know About the Earned Income Tax Credit
• Tips for Recently Married or Divorced Taxpayers
• Top Five Facts about Dependents and Exemptions

However, once the child’s investment income exceeds $1,800, the child’s income will be subject to the kiddie tax. When the kiddie tax applies, part of the child’s income will be taxed at the parent’s tax rate.

The kiddie tax used to apply to children under age 14. In 2006, Congress expanded it to include children under age 18. In 2008, the kiddie tax includes children under age 19, and dependent, full-time students under age 24.