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Date: July 27, 2007
Subject: TAX TIP OF THE WEEK -- RECORDKEEPING

This is...
G&G Associates
Tax and Financial Consulting Services
e-Newsletter




I'm Back and all settled in now in VA so look forward to the newsletters rolling in again. This weeks tip is right from the IRS's website. If you have been missing out on my weekly conference calls them stop it and get on board. This is serious if you have a business and it literally can save you or cost you thousands of dollars a year.

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What kind of records should I keep?

You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. 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. Your recordkeeping system should also include a summary of your business transactions. This summary is ordinarily made in your business books (for example, accounting journals and ledgers). Your books must show your gross income, as well as your deductions and credits. For most small businesses, the business checkbook is the main source for entries in the business books.
Supporting Business Documents
Purchases, sales, payroll, and other transactions you have in your business will generate supporting documents such as invoices and receipts. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain the information you need to record in your books. It is important to keep these documents because they support the entries in your books and on your tax return. You should keep them in an orderly fashion and in a safe place. For instance, organize them by year and type of income or expense. For more detailed information refer to Publication 583, Starting a Business and Keeping Records .

The following are some of the types of records you should keep:

Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts. Documents for gross receipts include the following:


Cash register tapes
Bank deposit slips
Receipt books
Invoices
Credit card charge slips
Forms 1099-MISC


Purchases are the items you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for purchases. Documents for purchases include the following:


Canceled checks
Cash register tape receipts
Credit card sales slips
Invoices


Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following:


Canceled checks
Cash register tapes
Account statements
Credit card sales slips
Invoices
Petty cash slips for small cash payments


Travel, Transportation, Entertainment, and Gift Expenses
If you deduct travel, entertainment, gift or transportation expenses, you must be able to prove (substantiate) certain elements of expenses. For additional information on how to prove certain business expenses, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.

Assets are the property, such as machinery and furniture, that you own and use in your business. You must keep records to verify certain information about your business assets. You need records to compute the annual depreciation and the gain or loss when you sell the assets.


Employment taxes
There are specific employment tax records you must keep. Keep all records of employment for at least four years. For additional information, refer to Recordkeeping for Employers.

Thanks

Gary Gray, RFC
Tax & Financial Consultant
877-817-6031 toll free
866-361-3872 fax
www.gngassociates.net

"Workers work hard enough not to get fired, owners pay enough for the workers to not quit...that's why workers never get ahead."
R. Kiyosaki



 

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