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It
is important as an owner of a business to keep proper records to ensure the
proper processing of your tax return. In this article we focus on common
records that are needed in connection with taxes on your business income.
Keep
records of all of your gross receipts. They are needed so that you can
properly report gross income from the business activity and self-employment
taxes owed on your net earnings. Self-employment taxes are equivalent to
social security taxes paid by both an employee and the employer.
You
must keep proper track of all expenses that are potentially deductible. To
this end, keep track of compensation paid to employees and independent
contractors, repairs, rents, taxes and licenses, bank charges, business
insurance, utilities, postage and shipping charges, and travel and
entertainment expenses, among other items.
Travel
and entertainment expenses receipts need only be kept if the expenditure is
over $75. For purposes of the $75 rule, each separate payment is treated as
a separate expenditure and you can treat a tip as a separate expenditure.
Although you don’t need to keep the receipt you still must keep track of
certain criteria of the expense, such as the time, place and date of the
business travel, and business reason for the travel, etc. When lodging
expenses are incurred, all receipts must be kept regardless of the amount.
It
is important to keep receipts and records of all assets that you depreciate.
Such information as how much was originally paid and when the asset was
placed in service is a valuable piece of information. It is also a good idea
to keep track of all warranty documents should the need for service arise.
Also, keeping accurate records of improvements to capital property is
necessary.
If
you use your vehicle for business purposes it is important to keep
supporting documents depending on what expensing method you use. If you use
the standard mileage rate it is important to keep track of the vehicles
business and total miles. Also information such as purchase price and the
date you started using your vehicle for business use. If you use the actual
mileage rate it is important to keep all documentation of the expenses
incurred with the operation of the vehicle.
Please
contact us if you have any questions about these, or other recordkeeping
requirements, particularly the electronic recordkeeping requirements,
including those for any employment tax obligations, that may arise in
connection with your business.
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