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What would you do if
the taxman (or woman) came to visit you today? Would you have what
he/she asks for? Do you have
your documents and records in an easy to find place? Okay, if it's
not easy to find, do you at least know where everything is? Yes .
No. . Kind of . . Not sure . . .
Being able to fend
off the IRS isn't the only reason to have your documents and records
organized. Your state department of revenue can audit you as well.
Your shareholders or partners can call for an independent audit at any
time. Then there are the more mundane reasons such as obtaining a
line of credit or an outright business loan, finding an investor or
partner, budgeting to purchase a large piece of equipment, landing a
government contract or just growing your business.
Did you know you must
keep your documents, receipts, invoices and other records for at least
three years? The IRS, in particular, can audit as far back as three
years. Some clients will request that you keep documents pertaining
to their projects for seven or ten years particularly in the environmental
field. I keep my records for seven years. I know it takes up
room to store these items especially if your business produces masses of
paperwork. You may want to consider scanning your documents to disk
or zip drive. At any rate, you must keep these items around.
Sole proprietors
including freelancers and independent contractors have a smaller list of
documents to keep track of than corporations and partnerships.
However, all businesses must keep the following:
* Bank
statements including Paypal and other online payment services (a periodic
print out of the account will work).
* Check carbons
or cancelled checks and deposit slips plus ATM cash withdrawal slips.
* Credit Card
statements and receipts for purchases put on each card. If you
purchase an item online, remember to print the receipt before leaving the
order confirmation page. That is your receipt.
* A/P invoices
(bills). Yes, you must keep a copy of the bill itself. A
cancelled check isn't enough to prove the expense.
* A/R invoices
(documentation for anytime you bill a customer or client).
* Monthly,
quarterly and annual tax returns with supporting documents including
payroll and sales tax.
* Receipts for
all purchases (anything you claim as a deduction on your taxes must have a
receipt to go with it including mileage).
* 1099s sent to
you by your clients as well as those you send to your subcontractors.
* Records of
barter deals (income and expense).
* Your business
license for city, county and/or state as well as your EIN, if you have
one.
* Employee records
(including company officers) such as forms W-4 and I-9 as well as
compensation agreements. If your state has income tax, you will also
need the appropriate withholding form. Employee records must be kept
for 4 years after the termination (voluntary or not) of the employee.
* Timesheets or
verification of commissions paid to employees.
* Expense
reports and employee reimbursement records.
* Unemployment
and worker's compensation claims (must be kept for at least 4 years).
* Travel
documentation including dates, meetings and outcomes.
* Contracts for
subcontractors, freelancers and other vendors.
* Contracts for
clients and customers.
* Papers
concerning lease and loan agreements.
* Financial
statements including Profit-Loss and Balance Sheets.
C-Corporations and
S-Corporations as well as LLPs and LLCs must also have:
* Incorporation
or partnership papers.
* Stock
Certificates (completed and logged).
* Minutes of
Board meetings (even if it's only you meeting with yourself).
* Memos and
letters concerning the disposition of the firm, policies and procedures.
There are many things
that can happen due to the lack of records and none of them are good.
It is much easier to keep your documents together as you go week-by-week,
month-by-month rather than having to rebuild, remember and face the taxman
unprepared.
# # #
Suzette Flemming is
the CEO / CFO of Flemming Business Services.
Providing financial direction to businesses since 1994.
Learn how to save money and increase your bottom line by
subscribing to our free newsletter – Make the Most of Your Money – at www.FlemmingBusinessServices.com
or send an email to newsletter@flemmingbusinessservices.com
or give us a call with questions at 425.432.5870.
Used with Permission
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