3 Tips For Keeping Proper Tax Records For Your Home Business – And Keeping The IRS Happy!

The last thing most people conceive about when starting a business is doing taxes. But proper planning will make making your taxes much easier - and keep the IRS happy!

Here are 3 easy tips for keeping proper records:

1. Whenever you buy something for your business, keep the receipt!

Not only will this make record keeping a lot easier, but if you are ever audited (having your tax return reviewed in detail by the IRS), you can verify your expenses, and save yourself money.

2. Write down all your expenses and income as they happen.

As your business grows, you'll have more and more activities to make you busy. The last matter you'll want to do each April 15 is to establish your records for the year. So, it's the best idea to write down all your financial activities as they take place. You'll see preparing your taxes will take much less time if you are organized.

3. Learn how to save money on your taxes.

As you know about taxes, you'll see that there are many deductions (expenses that reduce your income, and therefore your taxes) you can take that are not noticeable. When using your home office, you might be able to deduct (at least partially) repairs you make around the house, utilities, and your home's value at the time you start your business, and more.

The more you know about taxes, and the more organized you are in keeping records, the more time and money you'll save at the end of every year!

What happens if you don't keep proper records?

Each with small businesses are the most probable to have their tax returns audited by the IRS. If you don't have a receipt, you will likely lose the deduction and owe the IRS money.

And while an audit does not have to be feared, you should be prepared - the more organized your records, the easier it will be to prove your case.

If you don't get one, get a file box and some folders at your local office supply store (these supplies are deductible, so keep your receipts!) and make a filing system for your business. Put all your receipts in the proper folders, and put them in a safe place.

One more way to save yourself time is to record all of your business transactions - expenses and income - on a spreadsheet on your computer. Keep a column for income, advertising, supplies, etc. You don't need to be a computer expert. But keeping right, organized records will help you save time when you fill out your taxes at the end of the year.

And it can assist you plan, by giving you a snapshot or your financial progress once you need it.

Which might come in handy when you need to place ads, borrow money - or take a much needed and well-deserved vacation!