Keeping the proper paperwork to help your business run smoothly may help you avoid a revenue audit at the end of the year. If you do face a revenue audit though, the properly filed paperwork can make the process easier. Keeping all your receipts for purchases, expenses, donations and bank account statements along with any tax extensions filed can help you with the audit process.
Gross receipts are derived from the sale of your goods or services. These include your cash register tapes, bank deposit slips, receipt books, invoices, credit card receipt slips and any 1099-MISC's you have paid out to freelance contractors. Keeping these documents are necessary to help you file your taxes later to show income for your business. Acceptable alternatives for the Internal Revenue Service (IRS) during an audit if you do not have a receipt, such as a cancelled check, is a financial institution statement with the check number, check amount, the payee's name and the date the amount was posted by the financial institution. If the payment was made by an electronic funds transfer (EBT), the statement must show the payee name, amount and the date the amount was transferred by your financial institution. For credit cards, the statement should show the amount charged, payee name and date the transaction was processed.
Purchases and Expenses
Any business purchase should be accompanied by a receipt in the form of credit card slips, paid invoices, canceled checks and cash register slips. An expense is a purchase your business makes that is not resold as a good or service, such as office furniture or computers. Keep all these receipts in a place where you can access them immediately.
Bank Account Statements
Bank account statements for the fiscal tax year should be filed with your gross receipts, purchases and expenses. The statements back up what the business paid out and took in for the tax year. A fiscal tax year is 12 consecutive months that end on the last day of any month other than December.
Payroll Tax Return
The amount you have paid out to your employees as checks or direct deposits will also be required. The payroll tax return should include any federal and local taxes as well as an accounting of any retirement account withholdings. Employee payroll taxes should be kept at least four years, which is the required length of time by the IRS.
Record keeping suggested by the IRS includes keeping a business checkbook, a daily and monthly summary of your cash receipts, a log or journal of any check disbursements, any employee compensations and a depreciation worksheet. Another IRS tip is to keep your business checkbook separate from your personal checkbook. This is done to keep personal expenses separate from business expenses. Keep all the records for your business at least the minimum amount required by the IRS and all your previously filed tax returns.
Keeping a record of all of your employees, both past and present, with their Social Security numbers, contact information and their I-9 and W-4 forms is a requirement by the IRS. The I-9 form verifies that the employee is legally able to work in the United States. The W-4 form is filled out for the Employee's Withholding Allowance Certificate, which allows you to estimate how much to withhold from the employee's wages from the chart on the form.