Financial record keeping for small businesses: What to keep and for how long
Maintaining organized and current financial records is crucial for any business, including small ones. Proper record-keeping aids in preparing financial statements, tax returns, and tracking business growth while optimizing returns.
Here’s a guide to what documents to keep and for how long:
- Income Documentation: Retain copies of receipts, invoices, bank deposit slips, credit card slips, and cash register tapes for at least three years from the tax filing date.
- Purchases and Expenses: Keep records of all purchases and expenses, such as cash register slips, invoices, canceled checks, credit card slips, and petty cash vouchers, for a minimum of three years. If claiming a bad debt loss, extend this to seven years.
- Assets: Document the purchase, sale, and depreciation of business assets. Keep records like real estate documents, canceled checks, and invoices until the asset is disposed of through a taxable transaction.
- Employment Tax Records: Maintain detailed records of employees, including names, addresses, social security numbers, employment dates, and income tax withholdings, for at least four years.
Choosing Between Hard and Electronic Copies: Electronic filing simplifies the audit process and reduces the need for additional documentation requests. Ensure you have backup files or login information for electronic records.
By following these guidelines, small business owners can ensure efficient financial management and compliance. For more information on financial record keeping for small businesses, visit the What kind of records should I keep? page on the IRS website.