Keep Track of Deductible Expenses

Good record-keeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience.

Most importantly, good records help you document the deductions you’ve claimed on your tax returns. These records must support the income, expenses, and credits you report and should be available at all times if the IRS decides to inspect your tax returns.

Why Keep Records?

Everyone in business must keep good records to monitor the progress of their business. These records can show whether your business is improving, which items are selling and help you make sound economic decisions to achieve your objectives. Accurate, well organized records can increase the likelihood of business success and are needed to prepare accurate financial statements. These statements provide information about your business's performance used by banks, investors and creditors.

What records to Keep.

You should keep the proof you need in an account book, diary, statement of expense, or similar record. You should also keep documentary evidence that, together with your record, will support each element of an expense. Documentary evidence may be:

• Cash register tapes
• Bank deposit slips
• Receipt books
• Invoices
• Credit card charge slips
• Canceled checks
• Account statments
• Forms 1099-MISC

You should also, record the expense at or near the time of the expense. If you don't you may forget expenses, thereby overstating your tax liability.

If you claim mileage expense you should maintain a daily business and expense log and if you claim travel and/or entertainment expenses you may keep a weekly traveling expense and entertainment record. You do not need to write down the elements of every expense on the day of the expense. If you maintain a log on a weekly basis, the log is considered a timely-kept record.

Generally, you must keep records for 3 years from the date you file the income tax return.