Welcome to the Topic 3 Tips For Keeping Proper Tax Records For Your Home Business- And Keeping The IRS Happy.
The last thing most people think about when starting a business, is doing taxes, keeping proper records and being organized. But proper planning
will make doing your taxes much easier – and keep the IRS happy!
Why Should You Keep Tax Records?
Good records will help you monitor the progress of your business, prepare your financial statements, identify sources of income, keep track of deductible expenses, keep track of your basis in property, prepare your tax returns, and support items reported on your tax returns.
Here Are 3 Simple Tips For Keeping Proper Tax records:
1. Whenever you buy anything for your business, keep the receipt!
Not only will this make record keeping a lot simpler, but if you are ever audited (having your tax return reviewed in details by the IRS), you can prove your expenses, and save yourself money. You must keep your records as long as needed to prove the income or deductions on a tax return.
2. Write down all your expenses and income as they happen.
As your business grows, you’ll have more and more activities to keep you busy. The last thing you’ll want to do each April 15 is to organize your records for the year. So, it’s a good idea to write down all your financial activities as the happen. You will find preparing your taxes will take much less time if you are organized. The IRS Suggest Good record Keeping.
3. Learn how to save money on your taxes.
As you learn about taxes, you’ll find that there are many deductions (expenses that reduce your income, and therefore your taxes) you can take that are not obvious. When using your home office, you may be able to deduct (at least partially) repairs you make around the house, utilities, your home’s value at the time you started your business, and much more.
The more you know about taxes, and the more organized you are in keeping records, the more time and money you’ll save at the of every year! Not to mention avoiding possible tax audits.
What Happens If You Don’t Keep Proper Tax Records?
Now that we’ve shared with you 3 simple tax tips for keeping proper tax records. So what happens if you do not keep proper tax records?
Study shows that individuals with small businesses are the most likely to have their tax returns audited by the IRS. If you don’t have proper receipts, you will likely lose the deduction and possibly owe the IRS money, including fines, interest and fees.
And while an audit does not have to be feared, you should be prepared- the more organized your records are, the easier it will be to prove your case.
Keeping Proper Tax Records are easy and Simple to do.
If you don’t have one, get a file box and some folders at your local office supply store (these supplies are deductible, so keep your receipts!) and create a filing system for your business. Put all of your receipts in the proper folder, and put them in a 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 need to be a computer expert. But keeping accurate, organized records will help you save time when you fill out your taxes at the end of the year.
And it can help you plan, by giving you a snapshot of your financial progress whenever you need it.
Which may come in handy when you need to place ads, borrow money – or take a much needed and
well-deserved vacation!
Also read: Business Us of Home
