Two questions continuously requested by Community Entrepreneurs are “What sort of enterprise data do I’ve to maintain for the IRS?”, and “What’s type of record-keeping system ought to I exploit in my enterprise?”
Working a enterprise with out being attentive to record-keeping is a recipe for catastrophe. You might be considering “who cares-I hate bookkeeping and tax particulars, and if my enterprise takes in sufficient cash, it will not matter anyway… I will simply pay another person to wash up my record-keeping later!”
Not so quick, my buddy! A great record-keeping system is essential for getting ready your tax returns. And in case you do not put together your tax returns with care, you will not solely pay an excessive amount of in taxes, but in addition improve the danger of a dreaded IRS audit. If an auditor finds inadequate data or vital errors in your books, it might disallow deductions, plus impose hefty fines and penalties, presumably forcing you out of enterprise and wiping out your life financial savings as properly.
The excellent news is that the IRS does not prescribe one specific system of preserving data that have to be used. No two companies are alike, so there’s not one uniform style in the case of record-keeping. Any system is okay, simply so long as it paints a real image of your earnings and bills.
You may maintain your data both manually, or with a pc.
The guide system works tremendous for smaller dwelling companies and price solely $10 to $20 a 12 months for a ledger e-book and a few manila file folders. I like to recommend a Weekly Bookkeeping booklet, the place you possibly can file your earnings and bills regularly, after which replace the 12 months thus far totals, by expense class, on the finish of every week. This fashion you at all times have an updated assertion of Revenue and Bills, or “Revenue and Loss” report, at your fingertips. Along with the weekly file e-book, maintain a examine register, an including machine, a mileage log,and an accordion file shut by for submitting receipts. Arrange your receipts by class; Promoting, Journey and Leisure, Cellular phone, and so forth.
A computerized record-keeping system works on the identical ideas because the guide system, nonetheless, the pc automates the method. You should use spreadsheets to file your residual earnings and bonus checks, and use separate columns to categorize your bills.
A good faster solution to categorize your bills is to make use of a software program program resembling Quicken or QuickBooks. These packages work like a checkbook register, with every earnings and expense transaction typed in as you go. A Revenue and Loss report will be printed in a snap-assuming you do have some primary accounting information. However beware. A software program program is not any substitute for a primary understanding of debits and credit. Typically the year-end experiences that I see produced from accounting software program packages is finest summarized by the assertion “Rubbish in-Rubbish Out”.
Should you’re snug on the laptop and have primary bookkeeping experience, good for you! However you do not want laptop software program to maintain correct data. At minimal, categorize your receipts (auto, workplace provides, promoting, and many others) in manila folders or an accordion file, and whole them up by class at tax time. Staple the including machine tape to every folder or stack of receipts. Both system is okay so long as it paints a real and correct image of your earnings and bills.
Community Advertising enterprise house owners ought to get a replica of IRS Publication 583, “Beginning a Enterprise and Conserving Data”, for extra particulars on IRS record-keeping necessities.
Jim Flauaus, President / CEO of Anchor Accounting & Tax, is a Community Advertising / MLM tax specialist. He connects with Residence Enterprise house owners and Community Entrepreneurs throughout the nation and around the globe through telephone, e mail, and fax to assist them plan and put together their earnings tax returns.