Guidelines for Safe and Efficient Maintenance of Tax Documents

Guidelines for Safe and Efficient Maintenance of Tax Documents Paper-based records including tax receipts can be organized and stored safely with the help of outsourced document conversion services.

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Businesses should keep their receipts organized and well-maintained records will help in the following ways. 

Monitor progress of your business

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Prepare financial statements

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Identify source of income

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Prepare tax returns

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Keep track of deductible expenses

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Keep an eye on basis in property

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Support items reported on tax returns

Small business owners inevitably have boxes full of receipts that are difficult to manage.

Often, these paper receipts are hoarded out of fear that electronic records may not be allowed by auditors. However, the Internal Revenue Service has advocated electronic storage system for business records and tax-related documents since 1997. So all paperbased records including tax receipts can be organized and stored safely with the help of outsourced document conversion services. These receipts are essential for companies to manage their accounts.

Important Documents That Should Be Kept for the Next Tax Return  Documents that contain information related to income from wages, interests, business or dividends: Form W-2, 1099 and K-1; brokerage and bank statements.

 Documents related to home and property: closing statements, invoices, receipts for improvements, proof of payments, insurance records.

 Investment documents: mutual fund statements, Forms 1099 and 2439, brokerage statements

 Credits and Deductions that include business use of home, vehicle sales tax, alimony, medical/dental expenses and childcare expenses: receipts, invoices, mileage logs, credit card statements, cancelled checks

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How Long the Documents Should Be Kept  Three years: Tax return forms and information that supports what you have claimed on your return, like records on property or investments, business assets. IRS has three years to assess additional tax and audit returns. You have 3 years to amend your return.

 Four years: Individual returns have to be kept for four years for many income-taxing states that have an additional year to audit individual returns. Business owners must safeguard tax related information that comprise gross receipts, asset records, proofs of purchase, invoices, employment records, bank statements, databases, voicemails and emails for at least four years.

 Six years: Form W- 2, 1099 etc to be kept for 6 years as IRS can contact you even after six years if you have failed to report income.

 Seven years: information related to loss from bad debts and valueless securities.

 Information related to your property, investments and retirement plans should be kept indefinitely. In case you sell/dispose of an asset, ensure that the related documents are kept for three more years.

Here are five important tips that small business owners must follow to ensure that the paper records can be shredded without fear.  Obtain all the information that IRS might want

As per IRS rule, a valid electronic receipt must contain the name and the address of the vendor, the amount paid and the date of transaction. It is also important to maintain a record regarding the products purchased and its use in the business, in case the auditor asks for this information later.

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 Make regular data backups

According to IRS officials, small businesses should make a routine check of their financial documentation stored electronically and secure backups by using reputable tax software, eliminating all phishing scam, updating security and securing data and network. The best practice is to keep the important data secure by maintaining an online backup and a local backup. Data retrieval should be a routine part of your company. Make sure to test your backups throughout the year.  Make sure you print hard copies

Print hard copies of your receipts, your receipt storage solution should be capable of printing legible hard copies of your scanned receipts. Ensure that your receipts are in good condition because blurred and faded receipts will not print well. Printed hard copies are important as some of the IRS investigators still require printed materials to work with.  Current database of your receipts

According to IRS recommendation, entering receipts and notes into your system is important as soon as you make a purchase. This will help you to come up with business justification if you have forgotten what and why you have made a purchase.  Track the people you have entertained

As per IRS rules, meals and entertainment expenses should be recorded and a list of names of everyone your company treats to a business should also be recorded Streamline your reports and potential audits when you capture your guest employers and an agenda of the business you discussed during your trip or meal.

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The goal for any small business is to have a well organized system for maintaining tax documents. Keeping a clean and simple record of all your receipts is helpful for your auditor as well as yourself. This is possible with the help of a reliable document conversion company -- they are cost-effective and can manage large volumes of documents. Besides, you are ensured accuracy and quick completion of the project.

www.managedoutsource.com

800-670-2809