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Record Keeping

For most people, IRS regulations require only that you keep records that are “sufficient to establish the amount of gross income, deductions, credits for your tax returns.

The burden of proof in tax examinations and most court tax cases, is on the taxpayer. Many business people look at record keeping as a necessary evil. A chore to be avoided or delegated.

You can’t possibly know with accuracy whether you are making money, and how much, unless you know your income, receipts, payables, and receivables.

Here are several other good reasons to keep good business records:

It is no exaggeration to say that for many businesses the difference between profit and loss is the control over expenses and income that comes with good record keeping.

Lenders are impressed with accurate long-range record keeping. It shows a mastery of your business; it implies accuracy; it instills confidence. In fact, institutional lenders and commercial banks will demand not only good records, but sometimes audited records.

Good record keeping builds credibility in every area of your business. If you want to sell your business, financial statements are a must.

In general a good rule of thumb is to keep any tax-related paper a minimum of four years.

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