While it’s true that receipts are a pain and can get out of control quickly, it’s important to understand that as a business owner, you must save the receipt from a transaction. This ensures good recordkeeping. However, you’re probably wondering what receipts you need to keep and for how long. We will answer these questions below.
If you have a business in Cincinnati, let Orcutt & Co help with your accounting, payroll, bookkeeping, and tax prep duties. We can help you understand what receipts you need to keep, and which ones are irrelevant.
Which Receipts Should Be Kept?
According to the IRS, good recordkeeping helps you monitor the financials of your business, prepare financial statements, learn where your income is coming from, keep track of tax-deductible expenses, and so much more. However, what they don’t tell you is that if you don’t keep records properly, you could end up in trouble.
Therefore, when it comes to keeping receipts, you should have the attitude of “better safe than sorry” and make sure you keep everything that is related to your business. Also, you may want to talk to an accountant to be sure. That being said, you should definitely save the receipt if it pertains to the following:
- Inventory
- Assets
- Advertising
- Vehicle expenses
- Education expenses
- Entertainment
- Networking
- Office supplies
- Professional contractors/services
- Travel expenses
- Miscellaneous expenses- anything not mentioned above will fall into this category
How Long Should Business Receipts be Kept?
When it comes to how long business receipts should be kept, you need to hold on to them for as long as the taxing authority, such as the IRS or your State Department of Revenue can audit you. Most of the time, audits can only go back 3 years from the date your tax return was filed. However, in some cases, if fraud or substantial tax underpayment is suspected, the IRS can go back 6 years from the date your tax return was filed.
Do I Need to Keep the Paper Receipt?
This is one of the most common questions that people ask. After all, 6 years’ worth of business receipts is a lot of paper. Fortunately, there is no rule stating that they have to be kept in their original form. You can file them if you wish or you can digitize them, whatever works best for your recordkeeping.
Conclusion
As a small business owner, it’s important to understand that in order to keep good records, you must keep receipts. If you have a business in Cincinnati, contact Orcutt & Co to help with your accounting, bookkeeping, payroll, and tax prep needs. The tax code can be quite complicated, we make it a lot easier to manage.
