As a small business owner, you know that running your business — all of the ins and outs — sits squarely on your shoulders. From the most important things, like staffing and worker’s comp, down to the smallest things, like buying pens and cleaning the bathroom.
But perhaps one of the greatest liabilities a small business owner faces is record-keeping and interplay that exists with what the IRS expects. At the end of the day, nobody wants to be on the wrong side of the IRS. Because, let’s be honest, there are no benefits from quarreling… the IRS will usually win.
Here are some great tips inspired by the IRS’s record-keeping page to keep you on the straight and narrow come tax season.
What is the importance of keeping records?
When you know your business, you can run your business more effectively. Well-organized records gives a business owner a snapshot of everything going on in their business. And, come tax time, filing is much easier.
What records are best to keep?
This one is easy: anything that shows your income and your expenses. How you keep them, however, is completely up to you. But we’d prefer “organized” if we had a say.
How long are records kept?
For this question, there are many different answers. But a good general rule is to keep them for as long as you would need to prove your deductions on your return. For a more detailed answer, here is the IRS’s full write-up on the topic.
How should you keep employment tax records?
Again, with no specifics needed, keep them for as long as you need to for proof. However, a recommended time provided by the IRS is “Keep all records of employment taxes for at least four years after filing the 4th quarter for the year.”
How are business transactions recorded?
You will want a solid summary of your transactions come tax time. Try to keep them in a journal or ledger. This includes payroll, sales, expenses, pay outs, and so on. A good system will save you time and headaches.
Remember, in the end, you are required to prove your entries to the IRS when you file. The burden of proof lies in your hands, so accuracy is paramount.
For more information on how we can help you with all of your small business-related needs, do not hesitate to contact us any time.