Equilibrium Accounting & Tax, LLC

You read everywhere that you should keep good business records, but the truth is you MUST keep good business records; it is required by law. Aside from the legal requirement, these records are still a great idea because they help the business owner: Measure the progress of your business Prepare financial statements Identify income sources Keep track of expenses ... Support your tax deductions The first 4 on the list are, in my mind, essential for running a business. Looking at those financial statements provide crucial data that allow the owner to make decisions based on the actual condition of the business. That last one is important because when it comes to tax deductions, you have the burden of proof. Any unsupported deduction will be denied in an IRS or State audit. What types of records will suffice? I recommend using an electronic bookkeeping system to properly account for your business transactions. In addition to that you should keep paper receipts that support items on your electronic records. You may think that the electronic records will suffice, but here is why they don’t: Suppose you buy $25 worth of gas for your business vehicle. The records will generally just say that you spent $25 at a gas station how does the IRS know that you didn’t buy $25 worth of potato chips? The receipt showing the date and the amount purchased will prove to the IRS that the $25 was spent on gas. How long should you keep your records? The IRS recommends at least 3 years for business accounting records and 4 years for any employment taxes. If you do keep electronic records, please be sure to back up your data regularly or better yet use cloud-based software, this will keep your data safe. If your records are paper, you should keep them in a fireproof cabinet, preferably one with a lock. If you have any questions about business record keeping, feel free to schedule a free strategy call at: https://squareup.com//556f970a-08bd-422/FBYXY2B55TCYM/date

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