Two questions steadily requested by Community Entrepreneurs are “What sort of enterprise information do I’ve to maintain for the IRS?”, and “What’s form of record-keeping system ought to I take advantage of in my enterprise?”
Working a enterprise with out being attentive to record-keeping is a recipe for catastrophe. You could be pondering “who cares-I hate bookkeeping and tax particulars, and if my enterprise takes in sufficient cash, it will not matter anyway… I am going to simply pay another person to wash up my record-keeping later!”
Not so quick, my pal! A very good record-keeping system is essential for getting ready your tax returns. And for those who do not put together your tax returns with care, you may not solely pay an excessive amount of in taxes, but in addition enhance the chance of a dreaded IRS audit. If an auditor finds inadequate information or important errors in your books, it will probably disallow deductions, plus impose hefty fines and penalties, probably forcing you out of enterprise and wiping out your life financial savings as effectively.
The excellent news is that the IRS does not prescribe one explicit system of conserving information 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 revenue and bills.
You’ll be able to preserve your information both manually, or with a pc.
The guide system works advantageous for smaller house companies and value solely $10 to $20 a 12 months for a ledger ebook and a few manila file folders. I like to recommend a Weekly Bookkeeping booklet, the place you’ll be able to file your revenue and bills frequently, after which replace the 12 months thus far totals, by expense class, on the finish of every week. This manner 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 ebook, preserve a test 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, Cellphone, 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 revenue and bonus checks, and use separate columns to categorize your bills.
An excellent faster method to categorize your bills is to make use of a software program program similar to Quicken or QuickBooks. These applications work like a checkbook register, with every revenue and expense transaction typed in as you go. A Revenue and Loss report could be printed in a snap-assuming you do have some primary accounting information. However beware. A software program program isn’t any substitute for a primary understanding of debits and credit. Usually the year-end studies that I see produced from accounting software program applications is finest summarized by the assertion “Rubbish in-Rubbish Out”.
If you happen to’re snug on the laptop and have primary bookkeeping experience, good for you! However you do not want laptop software program to maintain correct information. At minimal, categorize your receipts (auto, workplace provides, promoting, and so forth) 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 revenue and bills.
Community Advertising enterprise homeowners ought to get a duplicate of IRS Publication 583, “Beginning a Enterprise and Conserving Information”, 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 Dwelling Enterprise homeowners and Community Entrepreneurs throughout the nation and all over the world through telephone, e-mail, and fax to assist them plan and put together their revenue tax returns.