The Importance of a Paper Trail

The IRS will only allow deductions that you can prove. So a paper trail is a good thing.paper-pile-lg

It can be beneficial to ask financial institutions to make your monthly periods end on the last day of each month. Also, it is very helpful to have banks and credit card companies mail paper statements instead of printing them yourself. Keeping copies of cancelled checks, deposits, and receipts is a must. Attach payments to the appropriate invoices or make a note that a particular payment was received. File everything by year; if you are audited, it will be for a particular year.

Never track owner contribution or investment money as income. If you cannot prove a deposit was an investment, the IRS will count it as income. Make copies, attach info/bank deposit receipts and keep these filed in a folder labeled “Deposits”.

In a world where going green is the new fad and filing transactions electronically is important to people, it is necessary to archive these files by year as well. However, if you have everything on your computer the IRS can request to see your computer files, which you may not want to do. Paper may be out in this green time we live in, but for business purposes paper is still the preferred method of keeping the books organized.

For more information on Record Keeping visit: www.IRS.gov

 

-Kari Lemelin, Bookkeeper/Marketing Manager

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