How to keep good records for your business or self employed taxes

 
 

You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. Good recordkeeping will help you remember the various transactions you made during the year. If you can't remember what you had for breakfast last Tuesday you can realize the need to write more important things down. Records help you document the deductions you've claimed on your return. You'll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents, such as records relating to a home sale or purchase, stock transactions, IRA, business and rental properties should be kept longer. In most cases, the IRS does not require you to keep records in any special manner. They have accepted notes written on paper plates because they were written.

 

You should keep any and all documents that may have an impact on your federal tax return:
Bills
Credit card and other receipts
Invoices
Mileage logs
Canceled, imaged or substitute checks or any other proof of payment
Any other records to support deductions or credits you claim on your return.

 

Good recordkeeping throughout the year saves you time and effort when doing your taxes. If you hire a paid professional to complete your return, the records you have kept will assist the preparer in quickly and accurately completing your return. We can give you suggestions to help you with your records. If you have a simple business without employees you don't really need a big program like Quickbooks to do your record keeping. There is a program called Simple Start on the Inuit website that you can download for free.

 

One important thing when keeping records is to document whether each deposit is a sale, versus money from a credit line or refund. You don't want to pay taxes on money you borrow so clearly mark it so you know the difference.

 

You can use Google.Maps to figure out your business mileage. Look at you calendar to see where your appointments were. Look up online how many miles round trip it takes to go to that location, and then count how many times you went there in the year. Figure your miles for the first half of 2011 separately from the second half of the 2011. This is because January 1 through June 30, the rate is 51 cents a mile. From July 1 through December 31, it's 55.5 cents a mile.


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