Recordkeeping
Why should I keep records?
Good records will help you monitor the progress of your
business, prepare your financial statements, identify source
of receipts, keep track of deductible expenses, prepare your
tax returns, and support items reported on tax returns.
What kinds of records should I keep?
You may choose any recordkeeping system suited
to your business that clearly shows your income. Except in a
few cases, the law does not require any special kind of
records. However, the business you are in affects the type of
records you need to keep for federal tax purposes.
How long should I keep records?
The length of time you should keep a document
depends on the action, expense, or event the document
records. You must keep your records as long as they may be
needed to prove the income or deductions on a tax return.
How long should I keep employment tax records?
You must keep all of your records as long as
they may be needed; however, keep all records of employment
taxes for at least four years.
How should I record my business transactions?
Purchases, sales, payroll, and other
transactions you have in your business generate supporting
documents. These documents contain information you need to
record in your books.
What is the burden of proof?
The responsibility to prove entries,
deductions, and statements made on your tax returns is known
as the burden of proof. You must be able to prove
(substantiate) certain elements of expenses to deduct
them.
Source: IRS
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