How to Keep Proper Tax Records for Your Small Business And Keep The IRS Happy!
How to Keep Proper Tax Records for Your Small Business And Keep The IRS Happy! The last item the majority give some thought to when starting a business is doing taxes. But proper planning will make doing all your taxes much easier – and keep the IRS happy!
Here are 3 simple tips for keeping proper records:
Whenever you purchase anything for your business, keep the receipt!
Not only will this make record keeping a lot simpler, but if you’re ever audited (having your instrument reviewed intimately by the IRS), you’ll be able to prove your expenses, and save yourself money.
Write down all of your expenses and income as they happen.
As your business grows, you’ll have more and more activities to stay busy. The final thing you’ll want to try and do each April 15 is to prepare your records for the year. So, it’s a decent idea to put in writing all of your financial activities as they happen. You’ll find preparing your taxes will take much less time if you’re organized.
find out how to save lots of money on your taxes.
As you find out about taxes, you’ll find that there are many deductions (expenses that reduce your income, and so your taxes) you’ll be able to see what isn’t obvious. When using your office, you’ll be able to deduct (at least partially) repairs you have complete round the house, utilities, your home’s value at the time you begin your business, and more.
The more you get to know about taxes, and also the more organized you’re keeping records, the more money you’ll save each year!
What happens if you don’t keep proper records?
Individuals with small businesses are the most likely to get their tax returns audited by the IRS. If you don’t have a receipt, you’ll likely lose the deduction and owe the IRS money. And while an audit doesn’t need to be feared, you ought to be prepared – the more organized your records, the better it’ll be to prove your case.
If you don’t have one, get a file box and a few folders at your local office supply store (these supplies are deductible, so keep your receipts!) and build a file system for your business. Put all of your receipts within the proper folders and put them in an exceedingly safe place.
Another way to save yourself time is to record all of your business transactions – expenses and income – on a spreadsheet on your computer. Keep a column for income, advertising, supplies, etc. You don’t have to be a computer savvy. But keeping accurate, organized records will facilitate and save you time when you are filling out your taxes each year.
And it can facilitate your plan, by providing you with a snapshot or your financial progress whenever you would like it. Which may be available handy once you have to place ads, borrow money – or take a far needed and well-deserved vacation!