Wouldn’t it be great if you never had to worry about getting audited by the IRS, especially if you run a home-based business? And how can you avoid giving 30, 40, or even 50 percent in over-inflated tax payments to the government? Simple. By taking the time to properly document your activities every day. Without keeping track on a daily basis of your business activities you cannot boldly and confidently deduct every expense to which you are legally entitled. Recording your daily activities using a systematic and orderly tracking approach can help you save thousands of tax dollars and will help you “bullet-proof” your records.
Habit #1: Keep a Detailed Tax Diary. This diary, which can be your appointment book or daily planner, is the focal point of your documentation system. It should include:
- All of your appointments.
- Where and when you travel.
- Where you go by automobile.
- Where and when you entertain business contacts.
Habit #2: Keep Permanent Records. These include prior years’ tax returns, stock purchases and sales, equipment purchases, etc. Generally, you want to keep any record that relates to more than one tax year. If you purchase property, your permanent files should include the purchase documents, closing statements, deeds, and other expenses related to the purchase.
Habit #3: Keep Business Records. These include time sheets for part-time help, receipts, invoices, cancelled checks, and other evidence that you do business on a regular basis.
Failure to keep accurate records can result in very stiff penalties if you are ever audited. But you need never worry if you document your activities. The key is to record everything!
Posted by Alan Williams on 02/21/05