One of the best tips we can offer to any taxpayer is to maintain good records throughout the year. Spending a few minutes each day or week can greatly reduce your stress (and potentially your tax bill) come April.
The definition of “adequate records” is different to every taxpayer, based on your circumstances. You do not need to keep every receipt and piece of mail in a box (although some people still use this method). Find a strategy that works for you, and fits your budget. This could be as simple as keeping a journal, a handwritten ledger, an Excel spreadsheet, or perhaps using some sort of bookkeeping software.
Nowadays there are apps and software for everything – oftentimes there are even free versions available! For example, you can find smartphone apps that track and record all the miles you drive each year, and separate your “business” mileage from your “personal” or “healthcare related” mileage.
QuickBooks is a very popular accounting software that offers both desktop software as well as cloud-based options that you can access via any computer, tablet, or even a phone. Many of our clients grant us access to their accounting software, allowing us to login at any time to help them with problems as soon as they arise. This reduces the chances of having any major surprises at year-end.
Many small business owners use handwritten records in order to save money. But this can quickly become an overwhelming task as the number of transactions grows. Nowadays, bookkeeping software comes with many options and fits many budgets. For simple records, use whatever method works. But if you find yourself falling behind, it may be time to consider a new option.
When recording information, here are a few of the key items you’ll want:
- Dollar-amount of transaction
- Short description
If you have any questions on how to setup or maintain your own records, please contact us for more details.