Keeping Tax Records
A business owner is responsible for maintaining all of the business’ financial records. Tax records are an essential part of your financial records and can quickly shed light on your financial situation. Moreover, maintaining complete records is a best practice you should adhere to. If you fail to keep records, you could face penalties from the Internal Revenue Service (IRS) or have the outcome of your legal matter affected as a result.
Tax Records Are Your Responsibility
Tax records must be kept according to IRS guidelines. It is up to the business owner to properly keep tax records. Every entry that is made in a tax return must be backed up with adequate documentation. When you take certain types of deductions, you must have the receipts or other proof of the transaction. Keep all this documentation together in an organized manner so that it can be easily found if needed. Hire an accountant or tax preparer as necessary to keep and review these records.
Keep Track of All Business Expenses
Keep track of all business expenses that occur. This includes some payments that are easy to forget. For example, keep track of your petty cash expenditures. Be sure that you keep receipts for these purchases. If you have a fleet of vehicles, the expenses for maintenance, insurance, and licensing are all items that must be kept track of. Remember that you must have corresponding receipts for any tax deductions.
Use Software to Assist With Documentation
There are various software programs that are useful for assisting small business owners. These programs should be considered as support, and not as the only method of documentation. In conjunction with these programs, you must still utilize a method of organizing and storing supporting documentation necessary for filing tax forms. Consult with an attorney or accountant for guidance.
How Long to Keep Tax Records
Tax records must be kept as long as they may be needed as part of an IRS review. The length of time required to keep documentation varies depending on the type of records. In general, it is best to keep employee records for a period of no less than 4 years. When the tax records contain property transactions, keep the records for as long as you keep the property. Typical business tax records should be kept a minimum of 7 years. This will accommodate a tax audit, should one be ordered. Considering the availability of cloud-based storage medium, business owners may consider an indefinite retention policy so long as storage does not become an issue.
Business owners may need assistance with many areas, including tax concerns. Call the professional legal team at Udall Shumway PLC to schedule a consultation today.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Tax Records, or any other litigation matter, please feel free to contact us At 480.461.5300, log on to udallshumway.com, or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.