Donna Genie walks through recordkeeping for small businesses: keep personal and business money separate, scan receipts before thermal paper fades, and hold onto bank statements for at least 4 years and settlement statements for about 5 years after a sale. The IRS doesn't require receipts under $75, but keeping them anyway saves headaches.
Questions this video answers
At least four years.
About a year to a year and a half.
The IRS does not require receipts for items less than $75.
At least five years after the sale of the property.
Keep until about five years after those are concluded (for fixed assets > $500 and lasting more than a year).
Chapters
Hi, it's Donna. I wanted to talk to you about record keeping best practices. I get a lot of questions in this area, so I thought it would be best to clarify a few things. First, the best record keeping idea I can give you is do not commingle any business or personal funds. Make sure that all of your personal bills are paid out of your personal account and not the business account. If you need to, you can transfer funds from your business account to a personal account and then pay the personal expenses. If you don't have a business credit card, then use two separate personal cards and use one of them specifically for business. If you commingle the credit card information, it makes it a lot tougher. If you're in an audit, and also if there are finance charges, you cannot deduct them. Next, deposit all your cash for business purposes into the business account so you can track that revenue. Keeping the cash there will, if you just keep that out of the drawer, will lead you to trouble in an audit and it will also devalue your business asset. So when you sell your business, if you're not capturing all the revenue of the business, you're really just hurting yourself because that's going to be a multiple of that cash. So I know it's tempting because you don't want to pay taxes on the money, but there are better ways that we can solve your tax problems. So let us deal with that part and let's keep your business honest and keep you out of trouble. Next up, keep all your bank statements and your cancelled checks for at least four years, more if possible. I know that can get to be a lot of paper, but if you can scan it and keep it even longer, that's great. Also, if you've ever seen those thermal receipts that come off the printer, their ink fades after about a year, year and a half. That receipt is just a blank piece of paper. So if you need it for an audit, that would probably be two or three years down the road. So if you can scan those, if you want a solution for that, we also can help you get a solution so that all those receipts will be scanned and be proper documentation if you ever need them. Next, the IRS really does not require that you have a receipt for items that are less than $75. I don't suspect. I don't think you ought to just throw those all away, though. I think you ought to keep them. But if you're missing one fret, just make sure you have a record of what that expenditure was in some other format. Even if it's other than that original vendor invoice. Keep these things a little bit longer. Settlement statements from the purchase or sale of any property. You want to keep those for a good while at least five years after the sale of the property. Also, if you purchase any fixed assets for your business, those would be things that last more than a year that are greater than $500. Pieces of equipment, furniture, computers. Keep those lease documents and bank loan documents. You want to keep those until about five years after those are concluded. Also, any purchase or sale of stocks, same thing for the purchase. I know it's hard, but keep those at least till five years after you sell that stock or mutual fund. That will save you a lot of headache if you ever have to go back and typically those are big dollar items. You can view our records retention document in the Operations manual that's located on your portal if you want to see some more detail in this area. Lastly, I mentioned the services to help you manage receipts. We use shoebox.com There is also a zero touch app for your phone that will allow you to snap a picture of a receipt attached to your accounting records. You can also just upload those if you want to scan them directly into your Zbro software. So I hope those tips help. We will talk about some others in more specific areas in a few other videos, but if you have any questions on these, please feel free to let me know. Thank you. Have a great day.
