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It’s now the 4th quarter and tax season is right around the corner. For many small business owners that means scrambling to collect receipts, mileage logs, and other tax related documents needed to prepare their tax returns. If this describes you, chances are, you’re wishing you’d kept on top of it during the year so you could avoid this scenario. With this in mind, here are seven suggestions to help the small business owner like you keep good records throughout the year:
The small business owner should develop a system that keeps all their important business information together. Small business owners are encouraged to use a software program for electronic recordkeeping. Also, paper documents can be stored in labeled folders.
Throughout the year tax records should be added to the files as they are received. Having records readily at hand makes preparing a tax return easier.
This approach will help the small business owner discover potentially overlooked deductions and credits. The IRS should be notified of any address changes, likewise the Social Security Administration of any legal name changes to avoid processing delays with their tax return.
Records that the small business owner should keep include receipts, canceled checks, and other documents that support income, deductions and credits taken on the tax return.
Taxpayers should also keep records relating to property they dispose of or sell. This information is important to help figuring the basis for computing gain or loss.
It is generally suggested by the IRS that taxpayers keep records for three years from the date they filed their tax returns.
For the small business owners, there’s no particular method of bookkeeping that must be use. However, a method that clearly and accurately reflects the business gross income and expenses. The records should confirm income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
Well-organized records make it easier for the business owner taxpayer to prepare their tax returns. Good recordkeeping also helps to provide answers in the event that a taxpayer’s return is selected for examination or if the business owner receives an IRS notice. If you need help setting up a recordkeeping system that works for you, don’t hesitate to call.
User | 12/10/2020