6 Business Documents Owners Should Keep for Important Tax Records
If you are just starting your business, or you are a seasoned small business owner, it is good to go through the following checklist to make sure you are protecting yourself and your company.
You may have a lot of questions, for instance, how long should you keep receipts? To help you successfully tackle small business records management, We have pulled together a list of what you should be keeping and for how long.
1. Bank Statements (keep for three years)
Most banks give you access to monthly and yearly bank statements online. Keep the monthly statements handy until you receive your year-end report. Then, securely shred and recycle the monthly statements or delete them from your digital files.
If you’re still receiving paper statements, make sure you get those digitized and stored in the cloud. Or better yet, go ahead and sign up for digital statements.
2. Payable and Receivable Invoices (keep for seven years)
Invoices are important because they are the basis for profit and loss statements (P&L). This is one of the main things the IRS pays attention to in the case that you’re audited. Payable invoices serve as expense documentation, and receivable invoices serve as receipts of gross income.
3. Home Office expenses (keep for three years)
One of the best things about owning your own business is the option to work from home. If you do work from home and have a designated space you use to work, you can make deductions based on that square footage.
If you’re curious if your home office meets the IRS regular use test, you can check it against their standards here.
Be sure to hold onto your utility, internet, home insurance, second phone line, and property tax bills. A fraction, or sometimes all, of these bills could also be deducted from the taxes you owe.
4. Office Supply Expenses (keep for three years)
In addition to your home office expenses, you can also deduct the supplies you use to furnish your office.
Did you buy a new iMac, printer, and desk to help run your new e-commerce store or photography business? That’s deductible. Just be sure to keep the receipts.
5. Vehicle and Mileage Expenses (keep for three years)
Even if you’re conducting most of your business from home, the occasional use of your personal vehicle for business activity can be deducted. This is known as a “mixed-use asset.”
Whether you’re meeting with a graphic designer at a coffee shop or picking up supplies from your local crafts shop, it’s important to track those trips.
Track your miles traveled using a notebook in your car or download one of the free mileage tracking apps out there.
6. Tax Returns (keep for at least three years)
Your accountant will likely want to reference last year’s return for this year’s filing. The IRS could also ask for them if you’re audited.
Many tax services and software give you the option to download a PDF of your returns so you can store them digitally. As I’ve said above, always take advantage of going digital.