The Importance of Keeping Good Business Records for Taxes
Tax seasons come and go, but the need to keep important business records never ends.
When you list items on your tax return, you are creating a burden of proof that needs to be backed up by records that can prove the entries on your tax documents are valid.
Records that support anything on your tax return relating to income, credits or deductions should be kept for at least three years, or longer in some cases. While the IRS sets guidelines, it also suggests consulting with experts ranging from your accountant or attorney, to even your insurance company and follow their recommendations.
Important documents to keep include invoices for goods and services you pay for, as well as things that you are paid for. These items are part of your profits and losses for the year, and if you list these on your tax return, you need to have the documents to back them up.
You also should keep bank and credit card statements along with canceled checks and receipts.
The IRS recommends that if you have employees you should keep records relating to names, Social Security numbers, wages, tax deposits, annuities and other information for at least four years.
You’ll also want to keep track of travel, transportation and entertainment expenses.
For more information visit the Small Business and Self-Employed Tax Center at IRS.gov.
Bottom line: Knowing what records to keep and for how long to keep them is just good business.