|
Legalities: The records to keep
 Your
transactions and book entries need to be backed up by sales slips,
invoices, receipts and canceled checks. If the IRS audits your business,
you may have to show evidence of claims on your business tax return.
Supporting documents should be organized and easy to find. For example,
you may want to store them by year and catalog them as income or
expenses.
General documents
Here are some of the documents the IRS expects you to have on file:
- Gross receipts --
Show the amount and sources of income with register tapes, bank
deposit slips, invoices, receipt books, credit card slips
- Purchases -- To document
items you buy and resell, including parts and raw materials, keep
canceled checks, cash register tape receipts, credit card sales
slips, invoices
- Expenses -- Track
the cost of running the business through canceled checks, cash
register tapes, account statements, credit card sales slips, invoices,
petty cash slips for small cash payments.
- Assets -- Maintain
records on property you buy, sell or improve that is used by the
business by keeping purchase and sales invoices, canceled checks,
real estate closing statements.
Get an EIN
Businesses larger than one person must establish an Employer Identification
Number. EINs are used by the IRS to record the tax accounts. If
you don't need an EIN, you must use your Social Security number.
You need an EIN if any of the following pertains to
you:
- Have employees.
- Have a Keogh retirement plan.
- Operate as a corporation or partnership.
- File returns for employment taxes, excise taxes,
or alcohol, tobacco or firearms taxes.
Include your taxpayer identification number -- your
SSN or EIN -- on all returns and documents you send to the IRS or
you may face penalties. You can obtain an EIN by filling out Form
SS-4, Application for Employer Identification Number. Order the
form from the IRS at 1-800-829-3676.
If you have employees, you must get a Social Security
number from each one. When you make payments to an outside source,
you must get the source's SSN or EIN.
Employee records
If you are an employer, you are also expected to keep records identifying
each employee, as well as the hours worked and the wages earned.
You will need:
- Employee's full name and Social Security number
- Address, with ZIP code
- Birth date, if under 19
- Sex and occupation
- Time and day of week when employee's work week
begins
- Total daily and weekly hours
- Basis on which employee's wages are paid, e.g.,
hourly, by the job
- Regular hourly pay rate
- Total daily or weekly straight-time and overtime
earnings
- All additions to or deductions from wages
- Total wages each pay period
- Date of payment and the pay period covered
How long to keep
records
Most records should be kept at least until the IRS period
of limitations has run out. For tax purposes, the IRS requires
that all employee records should be held for at least four years.
You may need to keep records longer for non-tax purposes, such as
insurance or financing, so check with the appropriate institution.
|
