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What kind of records should I
keep?
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suited to your business that clearly shows your income and expenses.
Except in a few cases, the law does not require any special kind of
records. However, the business you are in affects the type of records
you need to keep for federal tax purposes. Your recordkeeping system
should also include a summary of your business transactions. This
summary is ordinarily made in your business books (for example,
accounting journals and ledgers). Your books must show your gross
income, as well as your deductions and credits. For most small
businesses, the business checkbook is the main source for entries in the
business books.
Supporting Business Documents
Purchases, sales, payroll, and other transactions you have in your
business will generate supporting documents such as invoices and
receipts. Supporting documents include sales slips, paid bills,
invoices, receipts, deposit slips, and canceled checks. These documents
contain the information you need to record in your books. It is
important to keep these documents because they support the entries in
your books and on your tax return. You should keep them in an orderly
fashion and in a safe place. For instance, organize them by year and
type of income or expense. For more detailed information refer to
Publication 583,
Starting a
Business and Keeping Records .
The following are some of the types of records you
should keep:
 | Gross receipts
are the income you receive from your business. You should keep
supporting documents that show the amounts and sources of your gross
receipts. Documents for gross receipts include the following:
 | Cash register tapes |
| Bank deposit slips |
| Receipt books |
| Invoices |
| Credit card charge slips |
| Forms 1099-MISC |
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| Purchases are the
items you buy and resell to customers. If you are a manufacturer or
producer, this includes the cost of all raw materials or parts
purchased for manufacture into finished products. Your supporting
documents should show the amount paid and that the amount was for
purchases. Documents for purchases include the following:
| Canceled checks |
| Cash register tape receipts |
| Credit card sales slips |
| Invoices |
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| Expenses are the costs
you incur (other than purchases) to carry on your business. Your
supporting documents should show the amount paid and that the amount
was for a business expense. Documents for expenses include the
following:
| Canceled checks |
| Cash register tapes |
| Account statements |
| Credit card sales slips |
| Invoices |
| Petty cash slips for small cash payments |
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| Travel, Transportation, Entertainment, and
Gift Expenses
If you deduct travel, entertainment,
gift or transportation expenses, you must be able to prove
(substantiate) certain elements of expenses. For additional
information on how to prove certain business expenses, refer to
Publication 463,
Travel,
Entertainment, Gift, and Car Expenses. |
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Assets are the property,
such as machinery and furniture, that you own and use in your
business. You must keep records to verify certain information about
your business assets. You need records to compute the annual
depreciation and the gain or loss when you sell the assets.
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Employment taxes
There are specific employment tax records you must keep. Keep all
records of employment for at least four years. For additional
information, refer to Recordkeeping
for Employers.
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References/Related Topics
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