IRS small business Videos - Start Great Recordkeeping Habits Now

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Transcript for Start Great Recordkeeping Habits Now

This is Portia Bingham.

I'm talking with David Alito about recordkeeping.

David, what's the best way to keep records for tax purposes?

Use a system that works best for you - one that accurately reflects your business income and expenses.

Your records must support all income, credits and deductions listed on your tax return.

It's best if you keep all receipts, payment information and tax information in one location to make filing taxes easier when the time comes.

Don't include any personal income or expenses.

However, if you lend money to your business from personal funds, be sure to keep a record of the transaction to avoid including the money as taxable business income.

Although you are required to keep tax records for three years, you may want to keep them longer in some cases.

My best advice: it's never too soon - or too late - to start good recordkeeping habits.

How should expenses be recorded?

It depends on whether you chose the cash or accrual method of accounting when you started the business.

With the cash method, you'll record expenses when you pay for them.

With the accrual method, they're recorded when you incur them.

Be sure to take advantage of all business deductions your business is entitled to.

It can be easy to forget some expenses when you're filling out your tax return.

What about assets?

What's the best way to keep track of those?

Records for property and equipment owned and used by the business should show the date acquired, cost and records of usage.

Where can a business find more information on recordkeeping?

Look to our Web site, IRS.gov.

Just type the words "business records" in the search box.

For helpful monthly tips and hints, download Publication 1518, the 2009 Tax Calendar.

Publication 583, titled "Starting a Business and Keeping Records," also has some really good information on recordkeeping.

You can download it from our Web site.

Thank you, David.

I've been talking with David Alito of the IRS.

This is Portia Bingham.

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