Recordkeeping Tips for Small Businesses and Freelancers

As promised, we’re back with more great tips from Jean Grady of TaxJeanie.com for small business and freelancers.  Last week we tackled Tax Tips for Small Businesses and Freelancers, and this week we’re diving into recordkeeping — which when done properly will help you take better advantage of those tax tips!

Now, if you’ve ever seen the film STRANGER THAN FICTION, it provides a perfect example of how NOT to store your business records.

“You keep your files like this?”
“No. Actually, I’m quite fastidious. I put them in this box just to screw with you.”

You probably already knew that you need a better system for your business records, but Jeanie’s here to offer us some more specific direction on the best practices for storing our business records.

Recordkeeping Tips for Small Business & Freelancers

Why are Business Records Important?

It’s vitally important to keep records for your small business in order for the following reasons:

  • Monitor the progress of your business
  • Prepare financial statements
  • Identify the source of your receipts
  • Keep track of deducible expenses
  • Prepare your tax returns
  • Support items reported on your tax returns

What Business Records Do I Need to Keep?

The law doesn’t have any specific requirements as long as you choose a system that is suited to your business and clearly shows your income and expenses.  Electronic records are acceptable as long as you can index, store, preserve, retrieve and reproduce the electronically stored books and records in a legible format.

While there are no specific requirements, here’s a list of supporting documents you’ll likely want to keep.

  • Gross Receipts
    • Cash register tapes
    • Bank deposit slips
    • Receipt books
    • Invoices
    • Credit card charge slips
    • Forms 1099-MISC
  • Purchases
    • Canceled checks
    • Cash register tape receipts
    • Credit card sales slips
    • Invoices
  • Expenses
    • Canceled checks
    • Cash register tapes
    • Account statements
    • Credit card sales slips
    • Invoices
    • Petty cash slips for small cash payments

How Long Should I Keep My Business Records?

The IRS is once again frustratingly vague: You must keep your records as long as they may be needed for the administration of any provision by the IRS.  However, the rule of thumb is to keep your documents for seven years after your taxes are filed and paid.  Never get rid of records if you have not yet filed your tax return for the year.

 Get Help From a Tax ProfessionalJean Grady of Accounting & Tax Solutions, Inc.

Consulting with a tax professional can help you strategize exactly what records are important for your business.  As I said last week, Jeanie’s been a huge help to me in getting my finances in order for my own small business.  If you’re in the market for a great tax pro with a small business or freelance focus, give Jeanie a call at 816-525-1411, or visit her website at www.taxjeanie.com for more information.

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3 comments

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  3. Pingback: Keeping Your Finances Organized for Tax Season | Blair Stover

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