Tax tip # 2: Get organized and know what you need
January 06, 2016

Preparing for tax season is a year's worth of work, so it's best not to leave it until the last minute. For businesses that see hundreds of transactions a day, it's a good idea to establish a thorough, efficient system of organization. The Internal Revenue Service recommends keeping any and all financial records to help prepare and support the claims on your taxes.

Why should I keep records?
Proper record keeping does much more than satisfy guidance from the IRS. Keeping track of finances helps businesses monitor their progress and assess their spending needs. Still, there's no denying that record keeping makes tax season go smoother. Instead of scrambling to find hundreds of documents from the past 12 months, accountants have a set location that holds most - if not everything - they need. Be sure to update your records continuously throughout the year to avoid shuffling through papers come January.

The information within your records helps keep track of any deductibles. It also supports the credits, income and expenses you report on your taxes. Records also serve to remind filers of relevant transactions, especially infrequent or tiny ones easily forgotten as the year goes on.

How do I store my records?
There's no official standard for the method you use to keep your records. Just be sure to keep everything you need, including receipts, proof of purchases, and records of expenses and assets.  As long as your records are complete, accurate and easily accessed, you should have no trouble if the IRS requests additional information regarding your tax return. Using a financial management software product is a great way to keep things organized.

How long must I keep my records?
Generally, keep them for three years. Small businesses need employment tax records on file for at least four years after the tax is due or paid, whichever is later. The IRS has a list of exceptions, but essentially, filers must keep their records until the period of limitations ends. This end marks the point at which the IRS can no longer review your taxes and filers cannot amend their tax returns to claim additional credits or refunds. If businesses file a fraudulent tax return or fail to file one year, they should never get rid of their records.

By maintaining records throughout the year, businesses can make filing taxes a simple process and keep on top of their financial standing.

Nexus: G-WEBCD1