What records should I keep?
Now that I’ve given you an overview of different ways to keep your records and why you should keep accurate records, here’s a brief synopses of what information to record.
Assets. This is the equipment you use for your business. Keep a record of what you purchased and when, how much you paid and how much you use them for your business. This information is necessary to calculate depreciation and the gain or loss when you dispose of the asset.
Income. Your income records would include sales related items such as invoices and contracts. Along with those, include copies of checks and your bank deposit slips. Other income items you want to keep are W-2 forms and 1099 forms.
Expenses. The detailed list of your expenses should include who you paid, what you purchased, the date, and the purpose of the expense. Be sure to keep all related sales receipts, bank card slips and canceled checks if you get them. If you travel for business you should also keep a detailed travel log that includes the date, destination, and mileage of each trip. Purchases of gas and car maintenance can be kept on this log also. If you qualify to take a tax deduction for the business use of your home you will need to keep all related expenses.
Copies of Tax Returns. Previous years’ tax returns are helpful when you are filing the current year return. The Schedule C, Profit or Loss from a Business, will provide the information you need to calculate self employment tax. When you are ready to retire, the amount you contributed will determine the benefits you receive. You’ll want a good record in case down the road there is a discrepancy about how much you earned during your working years.
It’s best that you have a separate bank account for all business related activity. Just like a check register, keep a cash receipts and disbursements’ journal. You will always know how much cash you have for your business and where the money went.