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As a practicing CPA for over 40 years, I have given advice to many start up small businesses and established businesses about having adequate record keeping. If you are in business, why not start the New Year with a clean slate and get your business house in order?
Those of us that practice in the tax preparation business to often have to represent a business before the IRS and without good business records it is like going into the OK corral for a gun fight without bullets. This is s very good way to get shoot down or in our case, owe the government money for bad record keeping. Under an audit, the IRS, in most cases, merely wants the taxpayer too verify the deductions taken on the return. Those of us in the business should practice some due diligence regarding your expenses when preparing the return but we do not have to perform an audit documenting your numbers. This would be very expensive and since only a small percentage of returns are audited, as waste of most people's money.
Today's IRS is much more sophisticated as electronic shuffling of paperwork has made the storage and use of matching documents proliferate over the past several decades. To prove an expense to the IRS, you must show something that verifies that the payment was made for some item of cost or expense to your business which was ordinary and necessary. A mere notation on a credit card statement or just a canceled check is NOT sufficient. The IRS is looking for the details. So, better business records should be your resolution commencing in 2011. Save those receipts. I propose to all business clients that they "borrow" one of those big envelopes from the post office and mark the outside "Receipts for 20XX."
You may never, ever need to go into this envelope to produce sufficient evidence to verify an amount on your tax return, but you never know if and when you may get audited. So, give your hired gun all the bullets they will need to have you be one of the lucky ones getting a "no change" audit, should your business be selected.
Those of us that practice in the tax preparation business to often have to represent a business before the IRS and without good business records it is like going into the OK corral for a gun fight without bullets. This is s very good way to get shoot down or in our case, owe the government money for bad record keeping. Under an audit, the IRS, in most cases, merely wants the taxpayer too verify the deductions taken on the return. Those of us in the business should practice some due diligence regarding your expenses when preparing the return but we do not have to perform an audit documenting your numbers. This would be very expensive and since only a small percentage of returns are audited, as waste of most people's money.
Today's IRS is much more sophisticated as electronic shuffling of paperwork has made the storage and use of matching documents proliferate over the past several decades. To prove an expense to the IRS, you must show something that verifies that the payment was made for some item of cost or expense to your business which was ordinary and necessary. A mere notation on a credit card statement or just a canceled check is NOT sufficient. The IRS is looking for the details. So, better business records should be your resolution commencing in 2011. Save those receipts. I propose to all business clients that they "borrow" one of those big envelopes from the post office and mark the outside "Receipts for 20XX."
You may never, ever need to go into this envelope to produce sufficient evidence to verify an amount on your tax return, but you never know if and when you may get audited. So, give your hired gun all the bullets they will need to have you be one of the lucky ones getting a "no change" audit, should your business be selected.
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