It is important to establish a system of recordkeeping that works for you. Some things need to be recorded daily, others can be done weekly or monthly. It is imperative that you get into the habit of saving and recording everything related to your business. You will need to keep written documentation to account for everything that goes into and out of your bank.
One of the first things an IRS auditor should do is create a cash analysis and compare this to the income and expenses reported on your tax return. Obviously, if you received any non-taxable income, it is to your benefit to note that information in your records. Otherwise the IRS will need an explanation of where that money came from and after a few years have passed, it may be hard to recall this information.
It is a good idea to itemize every deposit you make right in your check register and record every check or bank withdrawal as well.
It can not be mentioned enough... SAVE ALL RECEIPTS. There are many legitimate
expenses related to the operation of a home business and many of them
are overlooked. In order to hang on to your money, you need to utilize
all of the deductions applicable to your business.
Brigitte A. Thompson is an accountant, former daycare provider and work at home mom of three. She is the President of DATAMASTER, LLC, an accounting firm based in Vermont. Her book, The Home Daycare Complete Recordkeeping System, is used throughout the United States as a reference guide and training manual. She has been producing it since 1995 and updates it annually.For more information, please visit her web site at DaycareRecordkeeping.com.
All information is based on the current federal tax laws of the United States. Since these laws are subject to change, neither the author (Brigitte A. Thompson) nor this web site (www.MomsBudget.com) assume liability for modifications to the law which occur after the creation of this work. Every effort has been made to ensure this information is as accurate and complete as possible. These articles contain general information for businesses and are offered as an overview of the law.
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