Keeping Business Records

Re: Keeping Business Records

This is what the IRS says:

How long should I keep records?

The length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out.

The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax. The below information contains the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.

Note: Keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return.

You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years.
You file a fraudulent return; keep records indefinitely.
You do not file a return; keep records indefinitely.
You file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.
Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

Re: Keeping Business Records

Sounds as clear as mud leave it to the IRS to keep us confused 🙂

Re: Keeping Business Records

Hello friends

Make sure you monitor the progress of your business: Good record keeping can show whether your business is improving, which items are selling and what changes are needed. Good record keeping can be the difference between failure and success.
Prepare accurate financial statements: You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can be a big help when dealing with your bank and creditors. An income statement shows the income and expenses of the business for a given period of time. A balance sheet shows assets, liabilities and your equity in the business on a given date.
Identify source of receipts: You will receive money or property from many sources. Your records can identify the source of your receipts. You need this information to separate business from non-business receipts and taxable from nontaxable income.
Keep track of deductible expenses: You may forget expenses when you prepare your tax return unless you record them when they occur. Believe me you will need all the deductible expenses you can find.

Thanks for sharing with us

Re: Keeping Business Records

This seems to be a good idea. Thanks for the informative information.