How to Keep Good Business Records
If you run your own business and write-off expenses on your tax returns, then keeping good records is a must.
Taxes are a big reason why we keep our business records organized: they help us prepare our returns, separate taxable and non-taxable income and support itemized deductions.
In fact, it’s business owners who have the burden of proof when it comes to verifying deductions on business tax returns. Keeping adequate business records helps to avoid problems down the road.
What type of business you’re in determines what type of records you’ll need to keep for the IRS. All businesses should keep records for:
Keep all of these records for four years. If you’ve filed fraudulent returns or if you’ve gone a year or two without filing, keep them indefinitely. Having a complete set of records will help expedite an IRS audit if your business is subject to one.
You may not keep records showing how much back tax debt you have, but the IRS probably does. And if they’re not, they’ll audit you to find out the principle and add the appropriate interest and penalties. A tax attorney can help you organize your business records and possibly avoid an IRS levy on your business’s assets, which is one record worth avoiding.
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