Electronic files take up much less physical space, allow for easier access, and enable quick backup. As a result, many businesses manage their records almost entirely electronically. Well, for starters, you sometimes need to have access to important documents for tax purposes or to borrow money. You may simply want to go back and compare one year’s financials to this year’s.
If you didn’t report income when you should have, you’ll want to hold onto your records for six years. The IRS rule says that if the income you omitted is 25% or more of the gross income shown on your return, you’ll need to keep your tax returns and records for six years. You should also note that if you need to amend your tax return, there is a time limit on that as well.
How long should I keep medical records?
Good business recordkeeping lets you prepare financial statements, helps you keep tabs on your expenses, and comes in handy if you ever get sued or audited. When it comes to keeping business records, one of the things you need to do is document your transactions through journal entries. These journal entries are the foundation of your small business accounting books. Again … when in doubt, it’s better to be safe than sorry and hang onto records longer than you need to.
If you find yourself in an employment tax debt problem, you may consult a professional for payroll tax relief to help you gather the right documentation for your business and employees. It’s recommended that you hang on to your accounting records for seven years. Some accountants suggest keeping things like financial statements, profit and loss statements, and audit reports indefinitely. Likely, your accounting software allows you to run these reports at any time, so there may be no need to create paper files for them. Paper bank and credit card statements generally can be discarded after a year, unless you need them to support your tax returns. If you receive your bank and credit card statements electronically, download any statements you need for tax purposes and keep them for seven years.
Documents to Store Forever
If you’re filing for additional credit or a refund, the time limit is the later of three years from the date you filed the original return or two years from the date you paid the tax. If you’re a corporation, you’ll also need to keep any director or shareholder meeting minutes and a stock ledger. Other key ownership and business documents should be kept permanently including deeds, titles, how long do you need to keep business records property records, and any contracts. Document retention guidelines typically require businesses to store records for one, three or seven years. If you’re unsure what to keep and what to shred, your accountant, lawyer and state record-keeping agency may provide guidance. The length of time you should keep a document depends on the action, expense, or event the document records.
Greg McBride, chief financial analyst at Bankrate, suggests that you put all your W-2 forms together in one place, and do the same for your 1099 forms and brokerage account statements. Your digital copies can be stored on a cloud-based storage solution. You can get started with DropBox and earn 500 MB of bonus storage space by using this link. Reconciled is an award-winning organization and one of the fastest-growing accounting firms in the country.
Tax records
You can only claim a deduction for the work-related portion of an expense. When you use the items for both private and work purposes, you need to apportion your deduction. For information about specific records you need for gifts and donations, see Keeping records of gifts and donations. For most expenses you need a receipt or similar document as evidence of your expenses. “If you haven’t yet started on your taxes, getting your paperwork in order will reduce stress and make you more efficient,” McBride says.
Your bank and credit card statements are key sources of information if your business is ever audited by the IRS. Plus, they give you helpful financial insight that can help you run your business better. Thankfully, most banks issue detailed online bank statements that make it easy for you to identify incoming and outgoing funds—which helps cut down on storage space and organizational headaches.