Get Your Business Tax Records in Order.
With the tax deadline quickly approaching, we’ve decided to provide you with some helpful tips on how to better prepare your business records for tax season. Ensuring your records are organized and complete ahead of time ensures that your taxes will be done more accurately and efficiently, resulting in your tax return being filed in a timely manner.
The IRS requires businesses to keep adequate records for tax deductions. The best advice we can provide you with is to follow the KISS principle for record keeping; that is, Keep It Simple and Safe.
Here are a few ways to help you keep your records in order!
Use a large container and inexpensive file folders to help stay organized throughout the year so you know where everything is.
Limiting Your Categories.
Start with the five major categories for a business — Assets, Liabilities, Income, Expenses and Owner’s Equity/Retained Earnings. Creating individual folders for income, expenses, bank statements and credit card receipts, travel, asset purchases, and outside services (independent contractors) allows you to keep track of your records in a more organized and accurate manner.
Income and Receipts.
Keep all deposit slips and be sure to note what customer the checks were from. Keep register tapes and credit card charge slips from customers. Keep invoices you have sent out.
Purchases and Recurring Expenses.
Keep all bank and credit card statements, canceled checks, and credit card slips or receipts from in-person purchases. Keep all invoices and other receipts and don’t forget to use petty cash slips so you can capture small cash expenditures. Also, for payments to vendors providing services, be sure to get a completed W-9 before you pay them. The IRS is becoming more strict on MISC-1099 filings and this ensures you’re not on the hook for potential penalties.
Make Notes on Statements.
We highly suggest that you make notes on your bank statements and credit card receipts. If there is no detail available on deposits or receipts make a note of who the income came from and who the check was written to.
Any paperwork that shows proof of assets purchased during the year should be kept on file. All information about business assets, starting with the purchase price and including setup, delivery, and training should be recorded. Keep track of maintenance and other expenses for use of the asset and don’t forget to record accumulated depreciation.
Whenever going on a business trip, make sure to capture all your travel paperwork for each trip. Keep a log of all travel by car; log every trip – when and where you went, who you saw and why. Keep receipts for all expenditures for air travel, lodging and meals.
Any emails that are received relating to your finances, receipts, etc. should be kept in a separate folder for your records.
Keep all employment tax records for at least four years.
Hopefully these tips will point you in the right direction toward getting more organized and relieving stress when tax time rolls around both for you and your accountant.
More Business articles from Business 2 Community: