
Gregory J. Cook, EA, CPA Accredited Tax Advisor |
What Kind of Records Should I Keep?
You may choose any recordkeeping system
suited to your business that clearly shows your income and expenses.
Except in a few cases, the law does not require any special kind of
records. However, the business you are in affects the type of
records you need to keep for federal tax
purposes.
Your recordkeeping system should
also include a summary of your
business transactions. This summary is ordinarily made in your
business books (for example, accounting journals and ledgers). Your
books must show your gross income, as well as your deductions and
credits. For most small businesses, the business checkbook is the
main source for entries in the business books. |
Supporting Business Documents
Purchases, sales, payroll, and other transactions you have in your business will
generate supporting documents such as invoices and receipts. Supporting
documents include sales slips, paid bills, invoices, receipts, deposit slips,
and canceled checks. These documents contain the information you need to record
in your books. It is important to keep these documents because they support the
entries in your books and on your tax return. You should keep them in an orderly
fashion and in a safe place. For instance, organize them by year and type of
income or expense.
The following are some of the types of records you should keep:
Gross receipts are the income you receive from your business. You should keep
supporting documents that show the amounts and sources of your gross receipts.
Documents for gross receipts include the following:
-
Cash register tapes
-
Bank deposit slips
-
Receipt books
-
Invoices
-
Credit card charge slips
-
Forms 1099-MISC
Purchases are the items you buy and resell to
customers. If you are a manufacturer or producer, this includes the cost of all
raw materials or parts purchased for manufacture into finished products. Your
supporting documents should show the amount paid and that the amount was for
purchases. Documents for purchases include the following:
Expenses are the costs you incur (other than
purchases) to carry on your business. Your supporting documents should show the
amount paid and that the amount was for a business expense. Documents for
expenses include the following:
Travel, Transportation, Entertainment, and Gift
Expenses
If you deduct travel, entertainment, gift or transportation expenses, you must
be able to prove (substantiate) certain elements of expenses.
Assets are the property, such as machinery and furniture, that you own and use
in your business. You must keep records to verify certain information about your
business assets. You need records to compute the annual depreciation and the
gain or loss when you sell the assets.
Employment taxes
There are specific employment tax records you must keep. Keep all records of
employment for at least four years. For additional information, refer to
Recordkeeping for Employers.
In addition, you
must keep supporting documents, explained in
the pop-up windows below.
Note: See
also, "Records
Retention" for how long to keep
supporting records.
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