The words "taxpayer compliance" can be enough to send shivers down any business owner's spine. As such, IRS documentation is at the top of mind for many business owners to ensure they have the supporting documents they need in case the government comes knocking.
With all of this in mind, what kind of records should you be keeping? What kind of IRS documentation do you want to have on hand to ensure compliance and accurate record-keeping? These are some of the things we're going to discuss in today's post so keep reading if you want to find out!
To start, let's go right to the source: the IRS themselves.
They cover the supporting business documents you should keep in this article and group them into six groups:
Now, let's explore these different forms of IRS documentation in greater detail to give you a better idea of the specific records you need to keep.
This involves the income you receive for your business. Some of the specific documents you need to keep will include:
(Take a look at this article next for four really good tips for effective invoicing for small businesses)
Do you keep a record of the items you buy and resell to your customers?
Some of these documents will include:
Some businesses incur more (and different) costs than others. Regardless, keeping a record of all of these documents is an incredibly important component of IRS documentation.
Be sure to keep documents like:
These documents come into play if you deduct travel, entertainment, gift, or transportation expenses. Click here to read Publication 463 which explains "what expenses are deductible, how to report them on your return, what records you need to prove your expenses, and how to treat any expense reimbursements you may receive."
Of course, you'll need to keep careful track of your assets as well. IRS documentation of your assets can be found on purchase and sales invoices, real estate closing statements, and canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transferred.
Be sure these documents include:
Are you in the habit of keeping all records of employment for at least four years? The IRS advises you to do so, and they also cover the employment tax record keeping documents you need to keep here.
(The right accounting software makes IRS documentation much easier. Click here to learn about the best options for your business)
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Here are three more posts to read next: