What records should I keep for tax purposes?
Tax records fall into four main categories: income, expenses, assets, and employment. Each has specific documentation you need to keep.
Income records include bank statements showing deposits, sales receipts, invoices you issued to clients, and 1099 forms from anyone who paid you $600 or more. Anything that shows money coming into the business needs documentation. If you have cash sales, keep a daily log or register tapes.
Expense records cover receipts, invoices from vendors, canceled checks, and credit card statements. The IRS wants proof that an expense actually happened and was business-related. For expenses over $75, you need the actual receipt. For travel and meals, note who you met with and the business purpose.
Asset records apply to anything with a useful life beyond one year. Equipment, vehicles, computers, furniture. Keep purchase receipts, financing documents, and depreciation schedules. You need these to calculate depreciation each year and to prove your cost basis when you eventually sell or dispose of the asset.
Employment records include payroll reports, W-4 and I-9 forms, timesheets, and documentation of tax deposits. If you have employees, every wage calculation and withholding needs a paper trail.
Retention periods vary. The general rule is three years from the filing date or due date, whichever is later. Employment tax records require four years. Asset records should be kept for the life of the asset plus three years after you dispose of it. If you underreport income by more than 25%, the IRS has six years to audit, so keep records accordingly if there’s any uncertainty.
Bank and credit card statements help but don’t replace receipts. Statements prove a transaction happened. They don’t always prove what was purchased or that it was business-related. A $200 charge at Home Depot could be job materials or could be for your house.
Working with a Detroit bookkeeping service helps ensure your records stay organized throughout the year rather than scrambling at tax time. The best system is one you actually use consistently. Digital storage works if files are backed up and organized by category and date. Paper files work if you have a consistent method. Full-service bookkeeping takes this off your plate entirely by maintaining your records as transactions happen.
Bookkeeping for Small and Medium Sized Businesses
The Next Step:
A Short Conversation
Tell us about your business and your current bookkeeping situation. We'll listen, answer your questions, and give you a clear quote.
More Questions
How do I handle owner draws in bookkeeping?
Owner draws are recorded to an equity account, not an expense account. They reduce your ownership stake in the business but don't affect taxable income since you pay tax on business profit regardless of how much you withdraw.
Read answerHow do I track business loans and interest payments?
Record the loan as a liability on your balance sheet, then split each payment between principal and interest. Your lender's amortization schedule shows exactly how to divide each payment.
Read answerWhat financial reports do professional service firms need?
Professional service firms need monthly profit and loss statements, balance sheets, and cash flow statements. Beyond the basics, AR aging reports, project profitability tracking, and revenue by client analysis address the unique economics of selling expertise.
Read answerHow do med spas handle inventory and service tracking?
Med spas track injectables by the unit with lot numbers and expiration dates, separate retail from treatment supplies, and log product usage per service. Specialized practice management software handles most of this, but it needs to connect properly to your accounting system for accurate cost analysis.
Read answerHow do I set up classes and locations in QuickBooks?
Enable classes and locations in QuickBooks Online under Account and Settings, then Categories. Create your categories, apply them consistently to transactions, and run Profit and Loss reports by class or location to see segment performance.
Read answerHow long should a medical practice keep financial records?
Medical practices should keep most financial records for at least 7 years. Patient billing records may require longer retention due to HIPAA and state medical record laws that overlap with financial documentation.
Read answer
