Support Your Tax Return: Three Simple Recordkeeping Habits
Part 1 of a practical series for small business owners
Good recordkeeping does more than help at tax time. It makes your financial information more useful, helps you identify deductible expenses, and gives you the documentation needed if the IRS questions your return. No system can make a tax return “bulletproof,” but a few consistent habits can make a real difference.
- Save receipts—and explain the business purpose
Keep receipts, invoices, and other supporting documents for business purchases. A bank or credit card statement may show that you paid, but it may not show what you bought or why it was a business expense. Add a brief note when the business purpose is not obvious.
Choose a system you will use consistently: a receipt organizer, digital folders, or an accounting tool that stores receipt images. Keep electronic records readable, backed up, and easy to retrieve.
- Download bank statements and check images
Save business bank and credit card statements regularly. If you write checks, retain the available check images, including the reverse side when needed to show endorsement. Save payment confirmations for electronic transactions, too.
Most banks offer check images on statements for a nominal fee. Or, you do not have to pay for check images to be printed on every statement if you can download and retain them separately. The goal is to preserve proof of payment before online access expires or an account closes.
- Keep timely records of business mileage
If you use a vehicle for business, keep records showing the date, destination, business purpose, and miles for each business trip. Also track total annual mileage and distinguish business driving from personal use and commuting.
These records matter whether you use the standard mileage rate or actual vehicle expenses. An app, spreadsheet, or paper log can work; record trips promptly and review any automatically tracked trips for accuracy. If you use actual expenses, retain the related vehicle expense records as well.
Keep it simple—and make it a habit
Set aside a few minutes each week to save documents and update your records. Reconcile your accounts monthly so missing items are easier to catch. Some records, including those supporting property costs and depreciation, need to be kept longer than routine expense records.
More guidance to come
In this series, I will take a closer look at receipts, accountable plans, bank records, mileage, and selected reimbursement and home office topics. Each article will explain practical steps and include relevant resources where available.
Need help setting up your system?
I provide one-on-one QuickBooks training and accounting guidance to help business owners keep clearer records and better understand their financial information. Contact Lisa J. Montano, CPA, at (954) 755-7302 or [email protected].