CHAPTER 3
Recordkeeping for Business Income and Deductions
Recordkeeping is a tiresome and time-consuming task. Still, you have little choice but to do it. Records show whether your business is producing a profit or a loss. The information in your records can enable you to prepare financial statements, such as profit and loss statements and balance sheets, which may be required by your lenders or investors. From a tax perspective, you need records to determine your gain or loss when you sell property. And as a general rule, you must be able to back up your deductions with certain clear proof, such as receipts, canceled checks, and other documentation. If you do not have this proof, your deductions may be disallowed. Certain deductions require specific evidence. Other deductions are based on more general means of proof. In this chapter you will learn about:
- General recordkeeping
- Specific substantiation requirements for certain expenses
- Records for depreciation, basis, carryovers, and prepaid expenses
- How long you should maintain records
This chapter is concerned with recordkeeping for income tax purposes. However, it is equally important to maintain good records to help you to manage your business efficiently ...
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