Darlees.com

IRS is like a silent business partner. They usually accept your annual tax return as a legal record of how much you owe them! However, like any good business partner, they may have a few questions.

And when your silent business partner ask questions, you may find your self needing a reliable & solid defense system.

One such system cost about $12.00 & can be easily found at your local office supply store.

If you’re just starting a small business & you do not have a clue, or the time, to learn bookkeeping software programs – invest in an accordion file.

Train yourself to put ALL of your receipts, invoices & bills into your accordion file each day.

In the beginning, do not worry about sorting out the receipts; just separate the receipts by months.

One way to make certain you develop the habit of stashing ALL of your business receipts into your accordion files, is to look at each receipt as if it were money… Because the more business receipts you have, the more money you’ll save on your taxes.

You can concern yourself with sufficient bookkeeping systems once you get your business up & running.

In the mean time, your trusted accordion file is your best defense against any tax agency, state or federal. Just be sure that the deductions that you or your tax professional reports on your tax return, equals the receipts you have in your files.

Depreciation & Business Use of the Home & other such deductions can add to your overall total of tax deductions.

Regardless of when you hire a part-time bookkeeper, you’ll need to keep all your accordion file records for 3 years. This is because the statute of limitations for tax audits & assessments is three years.

For items that you purchased & continue to own & use for business, keep these records for the life of the item. Examples: computers, printer, office equipment, office furniture, etc.

Depreciation is the annual deduction that enables you to recover the cost of business equipment or income-producing real estate.

More about depreciation in another article. For now, just remember to keep ALL your receipts in your accordion file. Your tax professional will often help you sort out what’s & isn’t deductible.

Cassandra Ingraham is a Tax Accountant & Instructor for Basic Tax Classes in the San Francisco Bay Area. During the balance of the year she can be easily found at http://www.taxeswilltravel.com providing Formal Introductions to Lenders for Accounts Receivable Funding (Factoring) & Purchase Order Funding. For help with back taxes, tax questions, tax tips, visit: http://www.taxeswilltravel.com

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.