What The IRS Wants To Know
As a small business owner it is your responsibility to accurately report any and all business income to the government. This means they want full information. In most cases, accurately reporting your income and tax situation will provide you with an “in the clear” type of situation. However, you may want to know what they are specifically looking for. If the IRS does investigate you, they will want answers to some specific questions:
Have you reported all of your business receipts and income?
Have you reported all cash transactions that have taken place, especially large ones?
Does the lifestyle that you lead fall into line with the income that you bring in?
Are your deductions for business only or do some fall under personal expenses?
Are you classifying your workers as employees and contractors correctly?
What vehicle, travel and entertainment expenses have you claimed that are not business related?
Do you have the correct payroll tax deposits made?
To make absolutely sure your business falls into line here you should download a copy of our FREE TAX GUIDE.
For other aspects of your TAX RETURN read these articles. I'm sure you will find them extremely helpful.
Tuesday, 8 January 2008
GOOD RECORD KEEPING
What Documentation Is Essential?
The IRS requires that some form of documentation be kept for any income and all expenses and purchases that you make for your small business. This involves a large number of items for most businesses: All bank statements, all canceled checks and all receipts are essential. All accounts - both personal and business are subject to auditing and all invoices and sales slips may be needed to verify your claims. Business expenses that are paid with cash also must be kept on file. You can do this through a petty cash sheet or on a simple notebook.
Keeping accurate electronic records are just as important. Your credit cards and bank records recorded online are all subject to auditing and therefore you need to keep them organized. They should not be your only records about expenses, though. For example, if there is a notation that you spend $100 at Wal-Mart, that could have been on the latest toys for your children or on software for your business, so record exactly what it is. Details are essential!
For more details of how to make sure your tax records are kept correctly, and that you are claiming for everything allowed, download our Free Tax Guide.
Go here for other sources of information designed to make your tax returns easier.
The IRS requires that some form of documentation be kept for any income and all expenses and purchases that you make for your small business. This involves a large number of items for most businesses: All bank statements, all canceled checks and all receipts are essential. All accounts - both personal and business are subject to auditing and all invoices and sales slips may be needed to verify your claims. Business expenses that are paid with cash also must be kept on file. You can do this through a petty cash sheet or on a simple notebook.
Keeping accurate electronic records are just as important. Your credit cards and bank records recorded online are all subject to auditing and therefore you need to keep them organized. They should not be your only records about expenses, though. For example, if there is a notation that you spend $100 at Wal-Mart, that could have been on the latest toys for your children or on software for your business, so record exactly what it is. Details are essential!
For more details of how to make sure your tax records are kept correctly, and that you are claiming for everything allowed, download our Free Tax Guide.
Go here for other sources of information designed to make your tax returns easier.
ORGANISATION IS THE KEY!
Organization The Key To Successfully Avoiding The Tax Man
Most people that are audited because of missing records, not because of dishonesty, so the key to avoiding the tax man is to have organized, efficient systems to keep records of your business income and outgoings.
Here’s a solution for you. Separate all your documentation by categories. You may want to consider categories for advertising, travel, auto expenses, utilities, rent or mortgage payments, professional fees, etc. Keep all receipts and canceled checks in the appropriate folder.
The burden of proof is on you. What’s more, small businesses are three times more likely to be audited than individuals. The auditors target is often reported business expenses, such as your travel expenses and your entertainment expenses. This should not be a problem for you if you have all of your expenses documented in an organized manner.
Stay organized all the year round and you will see the process is very simple and straightforward and will help you enormously if and when the auditor pays a visit.
For a comprehensive guide to all aspects of tax return management, listing what you can and should claim on your return get our Free Tax Guide.
Click here for more in-depth articles on tax matters.
Most people that are audited because of missing records, not because of dishonesty, so the key to avoiding the tax man is to have organized, efficient systems to keep records of your business income and outgoings.
Here’s a solution for you. Separate all your documentation by categories. You may want to consider categories for advertising, travel, auto expenses, utilities, rent or mortgage payments, professional fees, etc. Keep all receipts and canceled checks in the appropriate folder.
The burden of proof is on you. What’s more, small businesses are three times more likely to be audited than individuals. The auditors target is often reported business expenses, such as your travel expenses and your entertainment expenses. This should not be a problem for you if you have all of your expenses documented in an organized manner.
Stay organized all the year round and you will see the process is very simple and straightforward and will help you enormously if and when the auditor pays a visit.
For a comprehensive guide to all aspects of tax return management, listing what you can and should claim on your return get our Free Tax Guide.
Click here for more in-depth articles on tax matters.
Subscribe to:
Posts (Atom)
